NOTE: Information below should not be mistaken for the absolute answer. Make sure to contact a legal representative BEFORE getting involved in the process. Please also realize that information can change drastically from region to region.
Links:
Fatwallet RealEstate FAQ's
BankRate.com
Realtor.com
Free Demographics (registration required)
Creative Real Estate Online
M/PF Research
HELOC faq Thread
IRS Publication 527
$25,000 rental loss deduction (IRS website)
Property Analyzer excel sheet
SUMMARY:
Q: Does anyone have any recommendations on books for basic landlording, property management?
A: LANDLORDING by Leigh Robinson
“How To Pick Up Foreclosures”, by Wade Cook recommended by MaxMojo
“How To Buy Foreclosed Real Estate”, by Theodore Dallow recommended by MaxMojo
Q: How do I find out if an area is good for being a rental property?
A: MaxMojo said:Try the local Chamber of Commerce, Realtor Board, or gov to try and find current housing stats. You're looking for a low vacancy rate, low new housing starts, population growth, and a strong local economy.
Q: What should I be looking for in a house?
A
aniel2218 said:
It ultimately depends on all the variables. Just because there are a lot of apartments for rent doesn't necessarily indicate less demand. At the peak of the rental market in Seattle, for example, about two years ago the classifieds were full of listings but decent quality apartments were still renting very quickly. Also, just because there are 50-80 duplexes in your neighborhood, isn't necessarily a negative. What I would do is call and pretend I'm a prospective tenant. I investigate all the variables (see below). If you do that to 8+ properties in every area you are interested in, you will then have excellent data to extrapolate potential income & expenses, and most importantly you will be confident in your decision.
VARIABLES I WATCH FOR:
(1) FIRST and FOREMOST, exterior appeal. When a prospective tenant takes a drive by, will they keep on driving??? Is it attractive enough that they could see themselves living there? What do the surrounding properties look like? (Best house/duplex in worst area, etc.) Just because a property doesn't look good upon purchase doesn't mean it can't look good when you get done with it, with minimal expense. View the property with potential in mind, not just it's current status.
(2) INTERIOR ATTRIBUTES: What's the size of the apartment/house. Size of the bedrooms, living space, etc. In the case of a duplex-4plex, 1 BR apartments should be at least 600 sf or larger. 2 BR's should be 800sf and up. If it is too small, for example, you can assume that you will not get the couples, only solo tenants. This means your rent will not escalate as fast (shared expenses means less impact on their bottom-line, thus they can absorb more rent increase before needing to move).
What's the condition of the house/apartment? Needs new carpet? bath remodel? dirty? smokey? Condition of kitchen? I've done probably 40 cosmetic remodels and can pretty accurately guess what's it's going to cost after walking through an apartment. Other things: Is there existing laundry? is the plumbing copper or steel? Has the electrical been upgraded or is it the old knob & tube? Roof condition? What's the heating source? Who pays the utilities? etc. etc. The more you observe the better educated decisions you will have.
(3) NEIGHBORS WITHIN THE PROPERTY/NEIGHBORS ON THAT STREET: A telltale sign is the cars in the driveway. If you see lots of junkers, you have a pretty good idea it's a rough area. Also the condition of the yards, landscaping, etc.
VERY IMPORTANT: Real Estate Confusious say: the quality of the apartment/house will dictate the quality of the tenant and, in turn, the quality of tenant will dictate your monthly Advil bill. 
What metrics should I use to determine whether a house is worth the investment?
A: MaxMojo said:The "1% Rule" is simply a quick monthly way of the viewing Gross Rent Multiplier, and it suffers from all the shortcomings the GRM has. BTW 1% monthly figures out to a 8.33 GRM.
For example; It doesn't take into account the down payment, taxes, the upkeep, interest rate, debt servicing, comps, location etc., etc.
It is simply a crude "you must be this tall to ride this attraction" bar of entry that can be used to quickly filter out the overpiced stuff.
Do a few simple property analyisis with your figures and see what ratio you come up with that fits your situation. It may be .75%, 1.2%, whatever.
If the prop passes the 1% rules, then it merits a deeper look-see.
Q:Where do you landlord folks get your forms from and what forms are needed?
A: http://www.mrlandlord.com
Q: What kind of mortgage should I get?
A:MaxMojo said:There are many differing opinions on the ideal length of a mortgage. My preference is to stretch it out as long as possible, provided that you put the money you don't put into the mort payment into a good investment.
A benefit of taking a longer mort is taht when you're flush with cash you can make extra payment towards principle buy-down, but if things get tight you can just pay the lower minimum.
Q: Owner occupied clause?
A: SUCKISSTAPLES said:Re: Owner occupied - this is a gray area, the rule is ambigous specifaclly becuase peoples' circumtances change, and there are several ways to satisfy the requirements....keep in mind a lender has little incentive to start trouble if you are paying them every month, as they know you will likely stop paying entirely if they cause problems...whichever way you choose to go depends more on your personality, if you are willing to put up the fight if the need ever arises, like whether you try to claim every IRS deduction you can get, knowing that you may have to support your deductions if they trigger an audit...(chances of which are slim).
Q: If I am married is there any advantageous/disadvantageous to putting the house in one's name or ther other?
A: SUCKISSTAPLES said: Another hint if you are MARRIED is to (if possible) buy properties IN ONE NAME ONLY AS SEPARATE PROPERTY. This of course means you can only use the income from that 1 spouse to qualify. The advantages are that EACH of you can buy a property, and the debt wont be counted against both of you on credit reports!
Q: what appliances are typically provided in a rental home?
A: It really depends on the region of the country
Q: What should I know about foreclosures?
A:MaxMojo said:Cache:
Foreclosure shopping in most states is broken down into 3 markets:
1. Pre-foreclosure, where you bargain with the owner after they receive their notice of default, but before the property goes up for auction.
2. At the auction.
3. After the auction, where you deal with the bank, or lender, who got the property back at auction when nobody else bid high enough.
All three have their pluses and minuses. #1 involves dealing with people, usually when they're in a difficult time of their life. This requires lots of people skills and can be very time consuming, however under the right conditions can require very little of your money.
#2 is easy, just bring a wad of cash and bid. This also has the added convienience of the senior foreclosing loan needs to be bid upon and purchased, but most all junior lien are wiped off by the foreclosing auction! In other words if a first loan of $100k forecloses, a junior second of $25k is simply wiped out, the winning bidder is no longer responsible for it. The downside is that others, including a junior lien holder protecting his position, may bid against you. And there aren't that many deals that make it all the way to auction, but they do happen.
#3 is fairly easy, but does take some detective work. Also most banks are pretty savy and they have local brokers market repos (know as REO's) in the retail arena.
Q: Should I get Home Warrentee?
A: Daniel2218 said:A general thought about MAINTENANCE: I personally don't use the maintenance contracts. I think they make sense if you have one or two properties, but one can pretty easily find handymen at $12-15 an hour who will do work with minimal supervision. ...
MaxMojo said:A management firm usually charges 6 - 10% for their basic services, 50% months rent to fill a vacancy, and al la carte as different problems pop up.
Q: What Home Warrentee company should I use?
A: SUCKISSTAPLES said:As far as HOME WARRANTY companies go, they usually are state-specific, and only provide coverage in certain states. ...
Do a search for home warranty on Yahoo, and there are several sites which compare and list home warranty companies in your state.
Umbrella Insurance is the way to go for liability.
Q: What should I know about trusts?
A:MaxMojo said:Besides placing any income properties in a LLC or Corp, you may also consider placing them in a trust. Although a trust does not offer any legal liability protection, it does do a good job of "hiding" the asset.
For example, if somebody decides to sue you personally, an ambulance chasing contingency lawyer will run a simple search which will reveal all your property holdings (equity). However if your assets are in trusts you will appear to own nothing, therefore the lawyer might tell the client that he will take the case only on a per hour basis. This alone will stop many lawsuits cold.
If they spend enough effort they can easily force your trustee to reveal the benificiary of the trust (you) but there's a good chance they may not get that far. Think of a trust as your first line of defense. It should not replace a proper business entity and a good amount of insurance.
Your trustee should be someone who does not share your last name, lives out of state, is trustworthy, and has some common sense. Your otherwise useless lawyer brother in law is a good candidate.
Trusts cost only a few bucks to establish, have no effect on your taxes, are legal, cost nothing to maintain, are simple to manage, and do not trigger the due on sale clause.
You can also have fun with their names. Try something like "The Thailand Christian Girls Orphans Trust", or the "Keep You Greedy Paws Off My Fat Wallet Trust".
Tips and Tricks
Daniel2218 said:LENDER FLEXIBILITY: Lenders consider any property up to four units as a single-family residence and thus the requirements are the same as buying a house, including owner-occupying. While you will be looking at a marginally larger purchase price (and thus down payment) compared to a standard 2BR house, there are more benefits (IMO). (Any property with 5+ units requires commercial financing and thus a downpayment of 25% or greater, depending on net operating income.)
MORE BANG: On a 4-plex, for example, you have more opportunity to raise rents, minimize turnover costs, reduce downside exposure when you have one vacancy (25%) vs. a house (100%), spread expenses over more tenants, not to mention headaches are under one roof rather than running around all over town. All this potentially equates to more positive (or less negative) cashflow.
DaveHanson said:Another point in favor of Daniel's strategy: you can rent 1-3 units out, and save the 2d-4th unit as owner occupied (second place, guest pad for friends, whatever) and get the better finance terms. Might be a NICE way to go if you then want to sell your main house and need a place to crash while moving into the new place.
SUCKISSTAPLES said:The main reason I have stayed away from multiple family units is that if you have a fourplex, you have 4 ovens, 4 dishwashers, 8 toilets etc, which can result in higher maintenance costs...buying a home warranty also would cost 4 times as much...but if you have an hookup on maintenance, it shouldnt be a problem. Also, in the areas I rent, you tend to get a better quality tenant in a SFR than in neighborhoods with plexes...
I am in the process of reading through this entire thread and I will update this summary with commonly asked questions as I do. Edit as needed to make shorter. Just finished page 20 OrayoflightO
Message edited by: zULuGriD on 2006-07-27 21:04:50 CDT
