Rental Income While Cruising

[ErBrown]

Howdy Folks,

My wife and I are gradually working our way towards an exit strategy from the corporate world that will include several years of cruising at a minimum. Part of that process will be selling our current house and most of our stuff but we're planning to keep a nice little condo that we own. Long story short location makes it pretty desirable and with real estate here being so hot we'd like to have a place to come back to if we chose to in the future. From what we've seen of other condos in the area it should be fairly easy to keep rented and will put a little money in our pockets while we cruise.

My question here is around the logisitics of how others have managed this process from constantly changing locations with varying degrees of connectivity. Obviously we'd need someone to manage the property for us but how do you deal with things like maintenance? What happens when the AC goes out or your tenant needs a plumber and you're incommunicado? It seems something like an incidentals account would need to be created but of course that means you have to empower someone to actually access that $. Let's assume you don't want to impose on friends and family and will use a professional property manager, do you just set limits on how much $ they have access to without authorization from you, and if so how (did you / would you) go about setting this up?

-EB

[hpeer]

EB,

We are in a similar position. We own a 4 unit building and occupy one unit. Wondering what to do, how to manage when we move out. There are rental management firms, but not a clue on the cost.

[La Porte Rouge]

It is a very common practice for property to be turned over to a property manager for handling everything from rental, collections, maintenance, and repairs. They will generally have all of the procedures worked out as to how to handle these transactions. Most of the ones that I have used simply collected the rent and then deducted their management fee and any other expenditures made during the month for repairs, etc., and then sent a check to the property owner for the balance. You could probably have them do a direct deposit to your bank account or a transfer.

Naturally you would want to review their policies and procedures before you hired them to make sure that you were comfortable with everything, but this should not be a difficult transaction.

[Rocketman]

I own 20 rentals 1200 miles from where I live. It isn't that hard today to manage from afare if you have internet access, have someone that will take a look if needed, and a good list of contractors to do plumbing, AC, bug guy, legal, and so forth.

Now, with 20 units, I have a guy that I can call and the tenents can call to take care of most problems. He works very part time for me probably 20 hours a month. I also watch my bank account closely around the first of the month to make sure everyone is depositing there rent. Some times I have to send an email, make a call and last resort is have my guy come and make a visit. If they quit paying, I make a call to the lawyer to start the eviction process. The process is the same, regardless of me being there or not.

The only thing I have had problems with is turning the property around after someone moves out. Occationally the previous renters leave the property in good condtion. That is great, but normally the house needs to be cleaned, painted, and some mantainance. I have another guy that can do that or I will fly home for a week and do it myself. I usally need to go back home a couple of times a year anyway and now I have a legitamate reason to write off travel expences.
One unit or a couple of units, sould not be very difficult from afar, the secret that most new land lords will learn with time is to pick your renters very carefully. If your renter can not pay a security deposit, and first month rent up front, do not rent it under any cercomstance. Even if your renting it to your monther.

[Kenomac]

Rental property is what allows us to cruise 4-5 months per year, but it requires more than a couple of units to do it. One can't put all of one's eggs in one basket. When you're away expensive S$$t happens. Some tenants are slow to pay, things break and squatters can move in... yes squatters, we've had it happen. One bad tenant choice can cost you $10,000 or more to get rid of, so make sure you can handle a situation where there's no rent coming in while you're also spending many $1000s to get them out. We live in a deadbeat nation where there's plenty of professional deadbeats out there looking to take advantage of an absentee landlord. A management company can only do so much; if things break, they'll hire someone to fix stuff, but probably not the way you'd like it done and not at the same cost you'd like it done for.

If you're expecting to go cruising on one or to rental units... it won't work.

Examples: When we left for four months of cruising two years ago, we returned to find squatters living in our carriage house. Cost: $14,000 to get the drug addict bastards out.

Left last summer to go cruising for four months with our 18 units at 100% occupancy. While away, some idiots from another neighborhood got in a fight, one got stabbed and then got dumped on our front doorstep (bad luck)... seven tenants moved out in one month using the incident as their excuse.

S$$t happens.

[Wyoming pirate]

Our first year out we hired a management service at 10%. They did OK but not like we would have. Once tenants know you are absentee, they go downhill fast. Due to that and keeping life mixed up we now cruise about half the time and rent as a vacation home...pays much better and the property is in better shape. We can still stay whenever we want as long as we have not booked it, or if a set date we block it out. We have a cleaning/management person turn it and it is working well.

[skipmac]

My mother-in-law managed rental property for absentee owners for years. About 95% of the time it went smoothly, renters paid on time, no major problems. Same for one of my neighbors who owns about 15 rental houses. He's very careful at choosing the tenants but every once in a while he gets burned.

Some of the horror stories. One rental in my neighborhood the tenants set up an indoor hydroponics farm (not growing cabbage to feed the kids I'm pretty sure). A few years of leaks, drips and 100% humidity almost destroyed the house. The owner had to replace all the sheet rock and most of the interior of the house. Same thing happened to another rental in the area.

My mother-in-law rented a house to a seemingly nice couple. Husband worked at a bank, wife was a teacher. They trashed the house in a year. Left holes in the walls, kept a dog indoors and used the spare bedroom as a litter box and more.

The odds of one of these is low but I would make really sure that I had a manager local to the house that kept an eye on things.

[autumnbreeze27]

My wife tried to manage a property on the other coast, and it was very difficult not being there. The mgmt company takes a cut, but it also relieves a lot of stress and hassle, the property used to drive her nuts with issues, now she just gets a check every month, mostly issue free (knocks on wood)

[Captain Bill]

We rent our house out. We got a property manager who has a reputation as a no nonsense SOB. He handles all of the tenent interactions. We keep about a month's rent in an escrow account that he has access to for repairs. He came highly reommended by people we know whose property manages. He has power of attorney to sign leases, make repairs, eveictions, etc. He charges half of the first months rent and 10% per month. If you get a property manager make sure to check him out with his current customers and see what their experience has been. Our manager makes at least one visit to the property per quarter and we get checks directly deposited in our account at the beginning of the month. We had recommendations for ours from people who had used him for 5 years.

[hpeer]

Thanks guys...really helpful.

[Cowboy Sailer]

Consider renting to military personnel at a discount. They don't skip out owing you rent. We had bad renters but never from the military.

[Stevens 47]

We have rentals on the other coast. To me the key is to have a good honest property manager. The first property manager I used years ago was just terrible my wife was dealing with them at the time. After some very suspect practices and a phone call to them, I fired them. Hired a good manager, we have used him for years now. Things run pretty smoothly.

[gypsy wanderer]

This is all good advice.
I build houses and remodel for a living. One of my clients owns several rental properties out of state. She has a property manager that she has had for years. One interesting thing in her case was that she sold all her lower income properties and consolidated down to fewer high end rentals. Way less hassles. Some of her tenants have been in her properties for a decade or more.
Does this mean no problems? NO Just recently she had to get three roofs repaired because of hail. Insurance did pay for this.
But for the most part it is a once a month book keeping kind of thing.
She jokes that she works 2-3 hours a month.

I don't know if you need the money from selling your house to go cruising
but if not you could rent it as well. Depending on the area you might be able to divide the house into several rental units to make the money coming your way each month even higher.

I am looking into creating some rentals myself and or building storage rentals before heading out. The notion of money coming your way each and every month is very appealing.

[SV THIRD DAY]

All I know is what we did.
We rented the house out and had the renters pay for our monthly cruising budget. 4 years of rentals....3 different tenants and one trip back get the place ready for a new renter. It worked great for us….but……

Here is the catch.
If you can't handle and stress of a broken water heater, a late rent, or missed rent payments. If this will keep you up at night, then you will not be a good landlord. It's an investment at that point and NOT your HOME anymore. If you have an emotional attachment, will nut up when the renters paint without permission, or can't laugh when you walk into one of the bedrooms to find the carpet GONE...then don't do it.

It worked great for us, but we had no house payment, so the rent was our monthly cruising kitty with some bank money to make up for the times when the renter flaked out...which WILL Happen.

It's a personal temperament thing I think because my wife could barely handle it because it was "her house" to me it was just a $250K investment throwing off $1700/mo in revenue with a little headache built in.

[Rocketman]

Originally Posted by SV THIRD DAY

All I know is what we did.
We rented the house out and had the renters pay for our monthly cruising budget. 4 years of rentals....3 different tenants and one trip back get the place ready for a new renter. It worked great for us….but……

Here is the catch.
If you can't handle and stress of a broken water heater, a late rent, or missed rent payments. If this will keep you up at night, then you will not be a good landlord. It's an investment at that point and NOT your HOME anymore. If you have an emotional attachment, will nut up when the renters paint without permission, or can't laugh when you walk into one of the bedrooms to find the carpet GONE...then don't do it.

It worked great for us, but we had no house payment, so the rent was our monthly cruising kitty with some bank money to make up for the times when the renter flaked out...which WILL Happen.

It's a personal temperament thing I think because my wife could barely handle it because it was "her house" to me it was just a $250K investment throwing off $1700/mo in revenue with a little headache built in.

Very well said, I have heard all kind of storys that many call horor stories but since I have been a landlord for many years of 20 homes, I have seen it all. Most of the time everyting works out as it should with little problems. We usally only hear about the worse cases. As stated above, if you can look at your home as an investment, and are not emotionally attached you will make a much better landlord.