Q for Landlords - Rental House with Pool?

[frogger]

I am considering the purchase of a rental house in southern CA. Is it a good idea to get a rental house with a pool? Are renters more or less interested in having a pool given that they require regular maintenance? Thanks for you thoughts on this.

[jhynesrockmtn]

I've never dealt with pools up here in the Seattle area but my experience with tenants maintaining anything like yards, etc. is terrible. Also the potential liability associated with a pool is huge for both tenant and guest of tenant/neighbors, etc. I wouldn't.

[71T Targa]

Given what I know about the renters we've had, I'd say NO.
They are not interested in, or capable of, keeping up with a pool.
Most have a hard time keeping the lawn mowed in the summer and the driveway cleared in the winter.

[JMPRO]

I would not do it unless you get a additional $200.00 a month on the rent to pay for a pool service, additional insurance and long term maintance. In Ca. the landloard is also responsible for the water and that can add to your monthly bill. I would not leave pool maintance to a renter.

[cstreit]

Yeah, never rented but I think you'd have to hire a pool service... ...and be double-damn sure it was gated and locked. I don't think I'd want the liability. Someones kid falls in, they sue you because you only had a 5 foot fence and the kid climbed over it. Clearly YOUR fault and not the parents.

...or drain it.

[stomachmonkey]

Call Wayne, he can help you build a simple deck that covers the pool.

[cairns]

Long or short term (vacation) rentals? If the latter I will tell you I don't rent a house on vacation unless it has a pool.

If long term rental definitely not. I've been a landlord. Never again.

[Rick Lee]

I think in AZ pools in rental properties have to have some kind of childproof fencing around it. I looked at a lot of houses that had such pools. The one we ended up getting has no fencing and would be a total deathtrap if we had kids. I've come close to falling in a few times while leaf raking it. I had contractors over last weekend and got nervous when they got too near the pool.

[frogger]

I appreciate your responses to my question. I was wondering if a rental house with a pool was a bad idea and you seem to confirm that. Thanks guys.

[McLovin]

I'd be interested in seeing how an investment property/single family rental house could pencil out to cash flow (or even come close) in any part of Southern California. Seems like buying a single family house as a rental is a bad idea anywhere in So Cal, pool or not.

[911Freak]

Originally Posted by McLovin

I'd be interested in seeing how an investment property/single family rental house could pencil out to cash flow (or even come close) in any part of Southern California. Seems like buying a single family house as a rental is a bad idea anywhere in So Cal, pool or not.

It's important to remember there are so many micro-climates of the real estate market here in So-Cal. Some places are a renters market where rents have plummeted in the last couple of years and landlords are happy just to have someone paying on time, other areas (sometimes only 5-10 miles away) you can cash-flow pretty easily if you buy right.

Our investors buy pools of sfr/mfr and either rehab and flip or minor rehab and lease-long term hold. You can find the cash flow areas using a few tools of the trade. I don't want to divulge these as I've paid my dues for these metrics but suffice to say if you make an acquisition in So-Cal close to 2001-2002 value with light rehab you'll pencil out with a cash purchase (you'll still make a better return then that cash sitting in a bank somewhere).

If financing the acquisition (up to 75%) an investor can still positive cash flow if buying at 01-02 prices. Ignore current market value (totally speculative here in CA), look to past sales prices and current market rents.

The real money right now is in buying broken condo projects, completing them and either selling or renting them out. These assets have been taken over by the banks (or are in receivership) and the banks are motivated to sell quickly and get them off the book as they can't invest more capital to complete them. Unlike single sfr where they'll list them with brokers and get a higher % of what their into them for, these are dead paper, already written off as loses and provide a quick source of badly needed capital to the institutions.

ymmv

Lots of action in this area

[Rick Lee]

Originally Posted by 911Freak

The real money right now is in buying broken condo projects, completing them and either selling or renting them out. These assets have been taken over by the banks (or are in receivership) and the banks are motivated to sell quickly and get them off the book as they can't invest more capital to complete them. Unlike single sfr where they'll list them with brokers and get a higher % of what their into them for, these are dead paper, already written off as loses and provide a quick source of badly needed capital to the institutions.

In my own yearlong experience of shopping for distressed properties (we finally closed a month ago), I got the feeling banks were in no hurry at all to turn a paper loss into a real one. We had several short sales go into endless limbo and eventual foreclosure when we were ready to buy immediately for over asking price. It sure felt like they'd rather hold onto a non-performing asset than to let it go for market value, which was often a loss well into the six figures.

[Hugh R]

Their little kid drowns, they take your house whether you have a fence around the pool or not.

[911Freak]

Originally Posted by Rick Lee

In my own yearlong experience of shopping for distressed properties (we finally closed a month ago), I got the feeling banks were in no hurry at all to turn a paper loss into a real one. We had several short sales go into endless limbo and eventual foreclosure when we were ready to buy immediately for over asking price. It sure felt like they'd rather hold onto a non-performing asset than to let it go for market value, which was often a loss well into the six figures.

Indeed!

I wasn't going to go into that but since you mentioned it

We try to stay away from single asset sfr short-sale and/or foreclosure acquisitions for precisely the reasons you mention

So speaking specifically in regard to multi-family and commercial broken condo projects:
We went through several "seasons" last year experiencing the same, however it differed greatly depending on the bank (regional vs multi-national) and if there was a regime change. We lost a few and closed a few just off of a new CEO coming or going.

A lot had to do with the Barry-O admin allowing institutions to re-classify non performing assets as performing if they'd already been written off etc! That was a huge factor (and a monkey wrench) in demotivating institutions to sell assets at all or at a discount. Reality still set in and several institutions that had either pulled contracts or pulled assets had started the disposition process again, albeit with a different attitude.

We have much more success with the large portfolios for all the above mentioned reasons. Institutions are more likely to sell a 200MM national portfolio at 45/100 then a single asset at 75/100 or 15M portfolio at 65/100....

Now we are just starting to see high end land and large CA portfolios at reasonable prices come available.

Without going all PARF:
Hopefully with the current foreclosures still at all time highs the current administration will quit interfering with the banks so they'll be motivated to sell these distressed assets, staff there REO dept adequately to handle the disposition side so we can get these homes to investors to rehab and eventually back into the ownership of responsible home-buyers!
Imagine that?! Dreaming, I know.....

ymmv

[chocolatelab]

For sure no pool.

If looking for rental investment i would lean away from single family toward multi unit. Duplex ect.

[Dantilla]

I used to own an apartment complex with a pool.

Properly fenced, pool service weekly, and daily check of the chlorine and ph levels.

It was worth the effort. Just the marketing value was important. Where many apartments let the pool get ugly or empty over the winter, I made sure it looked sparkly clean every day of the year.

I would not, however, want a single-family rental with a pool. Too much maintenance, too much liability.

[Zeke]

I suppose if you drain it you could market the house having a skateboard bowl.

No liability there.

No pool.

[masraum]

Originally Posted by stomachmonkey

Call Wayne, he can help you build a simple deck that covers the pool.

That was supposed to be green, right?

[red-beard]

It all depends on where the rental is, the type, etc. My neighborhood is just off the Energy corridor. I'd say about 5-10% of the houses here are bought/rented by ex-pats working in the US for a few years. Since most of these people are from Europe, and they are living someplace warm, they want a pool for the time they are here. In our group of friends, 3 families are ex-pats and 2 of them have pools.

One of my other neighbors, the wife works for BP. She is being moved to London for 4-5 years. They are renting out the house for $4200 a month. Without a pool, it would have been less than $3500 per month.

I think they own the house outright. Taxes run about $800/mth, and the maintenance costs (Pool, yard, on call service) is going to run $300-400/mth. So, he is netting about $3000 per month.

[frogger]

A lot of the details are still up in the air. I am starting to explore the possibilities and wondered if I should include or exclude pool homes from my search. The Wayne pool-deck option never occurred to me. Ha-ha. Thanks fellas.