January 30, 2008

To Landlord or To Condo: That is the Question

A lot of people choose condos over multi families because they don’t want to be landlords. These days, multi families in nice neighborhoods are generally purchased by developers. Then they are gutted, and fitted with granite kitchens and stainless appliances and resold as condos within a year. Owner occupied multi-family houses are almost never built any more. The only exception seems to be McMansions with an “Au Pair” or “In Law” Suite.

When I was growing up in a Cambridge triple decker that my parents bought in 1976, I learned useful landlording skills such has, how to jam a screwdriver into the bottom of a window frame to make a temporary drain to keep the bathroom from flooding during a Nor’Easter. I learned that it’s better to get a quality plumber that shows up and does good work, than to hire the guy with the best price. And I learned that if you are not trying to milk every dime out of your rentals that the quality and temperament of your tenants increases greatly.

In 1999 we bought a 2 bedroom condo in Somerville and we managed to hold on to my studio condo and we decided to rent it. Prices were going up and it seemed like the wrong time to sell. So, I put an ad in boston.com (these were the days before I knew about craigslist) and within a few weeks, a very nice couple wrote me a check for first and last month’s rent and like my mother before me… I became a landlord.

I rented that place out for four years until I sold it to my final tenant and it worked out great. Here’s why: I knew the value in the place was mostly in the equity and the tax advantages to owning a rental. So, my goal was to break even on my expenses. I charged a slightly lower rent than I could have gotten, so I was able to get tenants with great references. And if they called with a problem, I got it fixed as soon as humanly possible (see above, you need to have a great plumber. Ninety percent of common tenant problems can be solved by a plumber). The hardest part in that situation was bickering with the condo association over maintenance. But I’ll write more about that on another day.

Being a landlord in a multi family you own isn’t that difficult, especially when you compare it to condo living. If your house is owner occupied, you would have a lot more control over who lives in your rentals, versus having NO control over who buys and sells in your building. A lot of multi-families on the market in Cambridge and Somerville don’t have the latest and greatest upgrades, but in the long run they can be a great investment. Your tenants help pay down your mortgage and you can write off everything you do to their unit, and a percentage of maintenance on the common spaces. And your tenants can let your kids in when they forget their keys every day for the entire year that they are in third grade. Not that I ever forgot my keys for an entire school year or anything. Well, maybe a little.