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Author: CottonFields3 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127679  
Subject: Re: Rental Property Questions Date: 12/30/2012 8:36 AM
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Recommendations: 7
Caveat: I do not propose to talk anyone into my way of handling these issues; am only giving my opinion and experience.
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...a generally acceptable formula for yearly maintenance costs based on the age of the house .. Just a rough formula/number to get an idea of how much at a minimum should be set aside for routine maintenance."

"...one should expect to pay 1-3% of a home's value each year in maintenance costs. ... The 1-3% probably depends on age of home, type of home (townhouse versus detached), and construction of home (example brick facing versus wood siding).
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I would up it to 5%. It's no problem to end up at year's end without having spent the entire 5%; it may be a problem to not have put enuf aside, just in case Murphy's Law plays out. Expect that it will.

There are a couple of things about your plan that sound good: 1) Living in the house for several years will give you the best education on the house - better than any other way I know; and 2) The fact that you have some construction/repair experience is a definitive plus.

Even for repairs for which you get someone else to do the work, you still have the background to know enuf to "supervise" the work, rather than someone w/no experience who must rely solely on the credibility, or not, of a contractor/tradesman.
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"From a rental stand point (ease of rental, maintenance costs), do you all have an opinion of 2 bed/1 bath, or 3 bed/2 bath?

"Both for personal residences and rental properties, I don't buy anything with less than 1.5 baths - I think it limits rentability and resale."

"As far as rentals, for homes (not condo/apartments) I think 3 bedrooms is the "sweet spot" for attracting more highly desireable tenants - meaning, singles, couples, or small families."
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You specifically said, "ease of rental, maintenance costs", so the obvious things to consider are: One bath = one toilet to clog, not two; 1-2 bedrooms versus 3, means [presumably] less square footage to maintain, and fewer inhabitants, which likely [but not necessarily] translates into less maintenance.

The ubiquitous influence is that one should invest in a 3 bed/2 bath house [rental or owner-occupied]. While there may be no debate that one will have more buyers/renters in the market for the 3 bed/2 bath house versus the 2 bed/1 bath house, I haven't bought into that thesis for dictating my rental purchases.

I have three rentals, all about 100 yrs old, one has 2 bed/1 bath, the other two are 1 bed/1 bath. Everyone - Everyone! - has cautioned me to observe the prevailing belief that I'll be cutting myself off at the foot to invest in a 2-bed - and heaven forbid!, a 1-bed house. Again, no argument about where lies the larger market. Still, there is a market [albeit smaller] for 1 and 2-bed houses. For me, it's - so what?, that I'm marketing to a smaller group. What I know is: Mine is a quality house, deserving a quality tenant.

For rental property, the best thing I know of to hedge against a bad tenant, is a good [1 year] lease. I did a lot of research before drafting mine [which is 3 pages]; A quality tenant doesn't mind signing a 'you've-got-to-be-responsible-or-else' lease. Also [as when selling], when renting have the house in tip-top shape. Shabby-condition house will [likely] not attract the best tenant. [But Geez, there are no guarantees against getting a bum tenant.]

If I were planning what you are - to buy a house and live in it for several years then rent it - I would buy the house that suits me. But I'm not like most people. For me, it's just as much about the quality and design of the rehab, as it is about the investment potential. My satisfaction comes from improving a piece of property; the bonus is the [future] investment income.

[Apologize for such long-windedness, but...] Another issue Everyone! has cautioned me against, is my choosing to use all high-quality materials for rehab. For example, when I last [gutted entirely &] put porcelain tile floor and shower in one rental, folks said, "But it's a rental...Use linoleum...", etc. For me, I'm not so much renovating a "rental" as I am renovating a "house"; It may be a rental today, but I may decide/need to put it up for sale tomorrow, in which case I want it to be on the market as a quality house, not just rental/income property.

Just my $0.02; Hope it helps.
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