Quote:
Originally Posted by jeffk
I agree if you raise the rent $150 a month to pay for a roof that had to be repaired the tenant is NOT going to be OK with it. What I am saying is that BEFORE you rent out a property you should be including a maintenance buffer into the rent. If you as the landlord have a mortgage on the property, wouldn't you make sure the rent covers that? You know you will have to do some cleanup (paint touch ups, etc.) between renters. Shouldn't the rent or damage deposit cover your costs? You should be able to estimate your required maintenance expenses using expected lifetimes of roof, heating system, appliances, flooring, etc and add that coverage to a planned monthly rent.
If you do not, do this, you are planning to subsidize your tenants and THAT is not smart business. Maybe in certain areas you can't get the rent you would need to cover your costs. IMO, if would be business foolish to rent out a property in that area. You would be far better off to sell the property and invest your money in the market where you can get a 9.5% return with a LOT less hassle.
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I agree with Tilton BB. You could buy a house in 2005, and get a fair rent. In 2008, the bottom falls out of the economy. Big loss if you sell, if you can even find a buyer. Banks are foreclosing even on performing loans. If you were getting $1500/mo, when the lease runs out, or maybe before, the tenant leaves. Nobody wants to pay, or can afford to pay, $1500, so you finally rent it for $1250 and swallow the losses. 2-3 months, no rent? Raising the rent because you might want to replace the roof in 15 years is out of the question. Yes, you want to make those calculations before you buy, but if your calculations plan on raising the rent 5% a year, you'll have a lot of turnover and fix ups that come out of pocket. And more vacant months where you collect no rent. BTW, landlords don't make lots of money on rents, at least in the beginning. Real estate can be a shelter of sorts, depreciation, leverage, deductible mortgage interest, maybe travel (to Orlando?) to inspect and maintain the property.
Sounds like the mutual fund is perfect for you. I hope you're not paying a financial planner 1.5% to tell you to buy a mutual fund. Remember, you'll pay taxes on the capital gains distribution and more taxes when you make withdrawal to pay the first tax, or to move to a different fund. 9.5% is just a raw number.