May 13, 2006

If You Rent Houses or Apartments to Other People

is it a sort of calling, an opportunity to be of service while securing your financial future, or simply a business?

How often do you raise the rent? Does the rising value of your rental property justify raising the rent as little and as infrequently as possible?

Is it better to charge market rates, or slightly below?

Is the business of providing housing different from other businesses? How?

Posted by Attila Girl at May 13, 2006 05:58 AM | TrackBack

I would qualify renting houses as "a pain in the ass."

Charge market rates if vacancy doesn't bother you, slightly lower if it does.

Fundamentally, providing housing is not different from providing any other rented product. However, in some jurisdictions rent control has taken away most of the landlord's rights.

Posted by: John at May 13, 2006 06:52 AM

Okay, so there's no special "calling" in being a landlord/landlady.

Do you feel the same way about doctors and teachers?

Posted by: Attila Girl at May 13, 2006 10:02 AM

Maintain the properties well and keep the rent just below market rate.

Raise the rent as your costs increase. The rent isn't really based on the value of the property is it? Isn't it based more on market demand for rental property?

Posted by: Patrick at May 13, 2006 10:47 AM

Well, MajorMom and I are both landlords (she's got her previous house...and I've got one I've had the same tenants in for over 10 years).

First answer: No, I don't think that there's a calling for it...but rather an investment vehicle. If nothing else, you have someone else paying the note on an asset that's appreciating. You get all that appreciation and the tax breaks while it's being paid for by someone else. SWEET!

Second answer: It's all about risk like someone else said. Sometimes it's best to forgoe a little profit by knowing you've got the right people in your property. My 10 year tenants have put an awful lot of money in my pocket over the years and they take care of that home (2600+ sq ft) probably better than I would. Keep your expenses covered and be happy you have tenants. Of course, the market will dictate what your initial rent is.

Third: Market or less? I'd say you charge what the market will bear, but don't pass up the opportunity to make what you can. No sense in turning your nose up at money. On the flip side, if you charge a little less, then you might rent it faster. Seems to me that if you're running with the pack, you shouldn't have any trouble keeping the place rented.

Finally: Unless you've got hundreds of properties, you're not going to get RICH. The profit margin is VERY small and when tenants leave a property vacant, all of a sudden you're back being responsible for the entire note.

Hope this helps.

See you on the high ground!


Posted by: MajorDad1984 at May 13, 2006 02:02 PM

Renting for less then the market gets you long term tenants. Higher rent usually means high turnover.

The wrong renters mean damage, be sure to have a deposit and get references.

1% is what I have heard for rent. Property $100,000 then rent should be $1000/month. This can go up with the market. But less means you are supporting someone else.

Posted by: Jack at May 13, 2006 05:44 PM

It a calling to renters. For everyone else it's a business. If you're not making what you could in an alternative investment, you should think about selling the property and moving the money there.

Posted by: Darrell at May 13, 2006 07:40 PM

My tenant got all huffy when the management company sent him a notice with a late fee, after he forgot to pay the May rent for ten days. He thought someone ought to have given him a friendly reminder before the fees kicked in.

The way I see it, the water company or the credit card company isn't going to do that before they tack on late fees. Why should the property manager? Stuff happens and you forget. But when you do, there's a price to pay.

It has to be a business, or eventually you're going to get burned.

Posted by: Desert Cat at May 13, 2006 10:47 PM

Doctors and teachers are interesting examples to cite, for they belong in very heavily regulated industries.

For doctors, the regulations, and the malpractice feeding frenzy, have resulted in a work environment which is making it even more difficult for doctors to enjoy their work.

The Socialization of the school system has resulted in an situation where many teachers look on their job not as turning ignorant children into learned adults, but simply presenting lesson plans.

The founding fathers knew what they were talking about when they wrote "pursuit of happiness" instead of just "happiness;" virtually everything that has gone wrong in the US (and Europe) is consequential of the failure to learn the importance of that.

Posted by: John at May 14, 2006 08:52 AM

I used the examples of doctors and teachers for two reasons:

1) they are often used as examples of professions one gets "called" to;

2) their "industries" (quotes are their on behalf of public school teachers) are regulated.

I felt that this might provide an apples vs. apples co-mparison for landlords.

If you'd like to consider a less-regulated arena (at least by government), you might consider the minister at your local church.

Posted by: Attila Girl at May 14, 2006 12:11 PM

Any profession that one feels passionate about pursuing can be one's calling. But doctors charge plenty, and I don't know too many teachers who really would work for free, despite their pledges to the contrary.

It's important to make the distinction between "social worker" and "landlord". Social workers (whether government funded or private ministers) are paid by someone else to do their work. A landlord only stays afloat if she keeps her properties rented to tenants who pay the rent on time and take reasonable care of the property.

Trying to combine the two is a recipe for disaster, as I see it. Unless of course money is no object. But then why not start a private charity?

Posted by: Desert Cat at May 14, 2006 05:14 PM

If I ever get a rental property, I'll make sure to get tenants who can afford the place, and intend to take care of the property (and know how).

But when I hear people talk about raising the rent on good tenants every single year, just because they can, I don't know . . . it seems to me that extracting every last possible dollar out of people isn't the way to go.

Of course, I live in a part of the country where the high cost of housing (lovely as it is from the property-owning perspective) has gotten ridiculous, and appears to hurt a lot of economic sectors.

Posted by: Attila Girl at May 14, 2006 07:52 PM

Eeeekkk! I got so caught up in this one I posted about it and tried to do a Trackback to you, but it won't take the trackback address. Rats! I did plug in the archive address to this post at least.

'Scuse please!


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