Buy & Hold

The central Indiana real estate market never really did participate in the real estate bubble. When United Airlines went bankrupt, the maintenance center in Indianapolis shed many jobs pushing many of the homeowners on the westside of Indy into foreclosure. There has also been a lot of overbuilding in the area, so buying for appreciation has not been part of our strategy. Instead, our plan has been to buy and hold becoming landlords.

I will try to outline a few of our investing philosophies. The first thing we look at is our intended demographic. We try to look for people who might not quite be able to afford a home but would otherwise live in one. This includes young couples with children who might be starting out. We also frequently rent to people who are building a house after moving to the area but need a rental during that process. The houses that we tend to look for have 3 bedrooms and 2 bathrooms. This would be large for an apartment but represents a quality starter home.

Another consideration is that we do not rent anything that we would not be willing to live in ourselves. I think this creates a feeling of mutual respect between ourselves as landlords and our tenants. This means we have clean, well-cared-for properties. We also tend to rent at or slightly below market. This gives us a ready supply of potential tenants when one of our houses becomes available. We rarely have vacancies lasting longer than a week or two. That is despite the fact that we don't show a property until the previous tenant has moved out. This gives us time to have the place cleaned for sure and painted if needed. There is nothing like a fresh coat of paint to make a place look good. We have heard many times that our houses are the nicest and cleanest ones people have seen. All our houses are also in neighborhoods which makes them family friendly. We try to keep them looking nice to maintain property values as well.

Those are just some of the things we do since we can't count on rapid appreciation and don't have the time to engage in a large remodel and flip project.

Accidental Landlords

In this post, I hope to convey some of my experience in real estate investing. I will post from time to time on related topics as well.

My wife and I are what I have seen referred to as “accidental landlords” . Essentially what this means is that, when we outgrew our first house, we were unable to sell and ended up having to rent it out to show income to the mortgage company since we couldn’t carry two mortgages. We ended up renting it out to some acquaintances, but did not do a credit check. Well, things worked out OK for a while but then rent started coming in a few days late, then a few more days late, then a week or two late. I’m sure you get the picture. Eventually, we sent a notice that we would evict, and the family moved out on their own. We had to clean out the place, repaint everything, and replace carpet. It cost about $3000 to get back into rental condition. From this experience, we learned the following:

- Try to rent to strangers (we did rent to some good friends later and that worked out OK, although we were hesitant and explained that to them)

- No late rent. I have a short fuse now for putting up the eviction notices and have been to court to evict one other time.

- Always check credit. Nice people aren’t necessarily responsible people.

Despite the rough start, my wife and I actually enjoy our landlord experience now. We have gotten better at selecting tenants through reviewing credit, personal references, and personal interaction. We also have declined to rent to people that caused us concern.

I will post more info on real estate investing in the future. Please feel free to comment.