New Adventure

[goofiefoot]

Because work, baby, hunting, brewing beer, and working around the house isn't keeping us busy enough, we have officially joined the ranks of LANDLORDS!

We made the decision after a long talk with our realtor (who is incredible - hit me up if you're in Austin and want a great realtor), who owns several rent houses herself. She explained the benefits and risks, showed us some financial scenarios, and took us to some homes on the market that we could target. Once we had all the info, we knew it was right for us.

The Austin real estate market is doing well, and we really lucked out buying our current house in 2006. Our home value went up dramatically in the time we've lived there, and since mortgage rates are so low, we were able to do a cash-out refinance to get some down-payment money, and still stay close to our budgeted mortgage.

We started shopping for houses, and finally found this one. It was in our targeted area, and even though it was smaller and would pull in less rent than some of the others we saw, the lower price still made the monthly income acceptable. Plus, this one needed very little to make ready to rent.

So, we've closed, we've done some work to get it ready, and it's on the market. My realtor's company offers several rental services, and we are taking advantage of their option to handle (for a fee) advertising, collecting applicants, background checks, and all required paperwork, so we can be very confident of the tenants we get. As of today, they've gotten lots of interest. Hopefully we have renters in by December!

While Amy and I have nice, solid jobs with retirement plans, we wanted to take more of a hands-on approach with our investing. We're looking at this first house as our daughter's college fund. Our plan is to save all rental income and tax returns and use it for a down payment on another. Then another... That's the plan, anyway.

I thought I'd share. If anyone has experience in this and can offer some advice, it's certainly welcome. This is a big step, and a measured risk for us, but I think we'll do ok in the end.

[ZackM]

Good luck!!! I would love to do that, but we bought in a neighborhood that quickly has started turning into all rentals. A little harder to find the house/land we want and rent our current... But we've only been here a year so we have nothing but time and opportunity!

Seriously, I think you have a great idea there as long as the real estate company does quality checks on the tenets and you stay on top of them with inspections.

[Buckwheat]

Good lookin Lil place y'all got. My God bless y'all's new adventure.

[nck]

congrats! and shoot me a PM with your realtors name. i have a brother looking to buy in NW austin

[goofiefoot]

Thanks, y'all. We're really excited (and a little nervous).

Lizerd, I sent you the info.

[goofiefoot]

Well, I knew we would assume risk.

I had my A/C guy come over to service the A/C and furnace to make sure we're up and running. He found that when the new unit was installed in 2010, they neglected to replace the very clogged and deteriorating (possibly moldy) ducts. He believes they will completely fall apart if he tried to clean them, and has suggested we replace all ducts, boxes and grills to the tune of $2700.

Obviously, with a long-term investment we want to go ahead and get it resolved, especially before we get a tenant in. Good times.

[ZackM]

That sucks!!!

Good lesson learned for your future investments though. Something to have the home inspector look for in the future.

[goofiefoot]

The inspection showed some wear on the outside of a few of the ducts, and some grungyness in the vents, but it took the tech opening things up completely to discover the problem. My biggest challenge will be to make sure my tenants keep up with replacing air filters. I'm thinking about buying a 12-pack of filters each year and sending reminders each month to replace them.

[Slew]

Good deal! Supposed to close on one next month. Already have a tennant wanting to rent it. Trying to decide rent or sell another house as well. Hope to have a half dozen or so paid for in the next 5 years and not worry much about the corporate world.

[Mountaineer]

The inspection showed some wear on the outside of a few of the ducts, and some grungyness in the vents, but it took the tech opening things up completely to discover the problem. My biggest challenge will be to make sure my tenants keep up with replacing air filters. I'm thinking about buying a 12-pack of filters each year and sending reminders each month to replace them.

Good investment!

I wouldn't just change the ductwork out unless it really is a safety issue - have it tested by a lab to make sure it just isn't dust/dirt buildup. Here is some info from the EPA on duct cleaning:

http://www.epa.gov/iaq/pubs/airduct.html

I have had my rental for 3 years and always provide cheap filters for the renter to change on the return air vent and I or my associates change out the furnace filter every 3 months.

I you live close, you can save yourself the $ by finding your own renters (craigslist) and doing the background checks yourself. Property management companies just do the $50 internet background checks. If you are able to take care of the maintenance, it gives you an excuse to stop by the house every couple of months to check on things. Just make sure it is written in the contract that you can stop by with adequate notice.

My rental is out-of-state and I can still take care of everything myself, saving about $1400/yr. The renter is probably going to call you anyway if there is a problem.

[ck40711]

Good luck. I have always wanted to do exactly what you are doing. . . just haven't had the courage to do it yet. I hope it works out well for you, and that you will keep us in the loop on how it goes.

[goofiefoot]

I've got the AC guy scheduled for tomorrow to replace the ducts. I look at it as piece of mind for a long-term investment. Plus, I'll be able to deduct the work for this year's taxes.

While we are using the broker to get good tenants in place (and they are going well above and beyond as far as the screening process - background, credit, past-rental, employment checks), I plan on doing as much maintenance as I am able. Keeping costs down is important, but I figure the cost of my own time into it as well.

We've had two applicants already, but neither of them passed the checks. One had past evictions, credit issues, and such, the other had some criminal background, as well as financial concerns. Funny, it's not like we're targeting bottom-of-the-barrel tenants - we're priced a bit higher than average in a nice neighborhood. Sounds like we're still getting a good amount of interest, so hopefully a winner will come through.

[goofiefoot]

And we have tenants!!! They dropped off the money and signed today! Glad to have rent before our first mortgage payment is due.

It's a young couple who's about to get married. All their background, employment and credit checks were trouble-free. No pets. I'm hoping they like the place and want to stay for a while.

I plan to drop by early next week and introduce myself, welcome them, and run over our expectations.

[Slew]

Awesome! Closed on ours Thursday. Sould have it ready to rent by the 1st of the year. Have another one in Lindale ready to rent in March!

[goofiefoot]

Awesome! Closed on ours Thursday. Sould have it ready to rent by the 1st of the year. Have another one in Lindale ready to rent in March!

That's awesome! Congrats!

I'd really love to pull the trigger on another and keep the ball rolling, but Amy wants to get some long-term projects done on our house.

Our ideal situation is to buy enough good properties that give us a total monthly income over our current mortgage. If we can get to that point, we want to buy acreage and build our dream home, and eventually use our current home as another rental.