Multiple people interested in an Apartment
"I don't know how many people ""a ton"" is, but if you are getting more than, say, 6 people who are qualified to rent, you've priced it too low. Better to ask for $1200, and have a potential tenant haggle or ask you to reduce the price than to have 6 people want it for $900.  It's worth it to run a credit report, and let that help you choose. I agree with Victor, a bidding war is appropriate for a house sale, not rental apartments.  You didn't mention your country, but I'd be sure to find out the local laws regarding tenant choice. You may not (depending where you are) discriminate based on gender, sexual orientation, marital status, race, or religion." I wouldn't start a bidding war if I were you. Sometimes you may get potentially bad tenants who cannot find a property anywhere else offering more money just to get in a place. If you know nothing else about these people how can you guarantee they will keep paying the rent once they get in. The things you should be doing is checking the prospective tenant's employment and income status, making sure they are able to easily pay the rent. You should check their credit report to see if they have a history of bad debts. And you should be checking with their previous landlords or real estate agents to see if they caused any damages to their previous properties. You should create a form that prospective tenants can fill out providing you with all the essential information you are after. Get them so sign a statement that gives you authority to ask information about them with other people (their previous landlords/ real estate agents, and their employers). Have a system set out on how you will assess all applicants and for the information the applicants need to provide you with. Treat it as a business. I'm surprised by all these complicated answers. Yes @Victor, you can create a form that asks people to put down their financial information but you want to be careful and not put off potential tenants by asking for too many details. Depending on the OP's typical tenants, an extensive background and credit check may not be necessary. For example, if I have proof that someone is a graduate student at the local university, that's usually good enough for me because I am willing to bet that they will follow my contract.  Bidding war doesn't sound doable, you advertise a price correct? You can only be haggled down not up.  So my suggestion is to look at other rental advertisements in the area. Compare what you're offering (location, quality of house, cleanliness, amenities, etc) to the competition and price accordingly. If you're getting a flood of interest, then you're probably pricing below the average price in your area. Or you live in an area where demand is just much higher than supply, in which case you can also raise your rent.
Here would be the big two you don't mention: Time - How much of your own time are you prepared to commit to this? Are you going to find tenants, handle calls if something breaks down, and other possible miscellaneous issues that may arise with the property? Are you prepared to spend money on possible renovations and other maintenance on the property that may occur from time to time? Financial costs - You don't mention anything about insurance or taxes, as in property taxes since most municipalities need funds that would come from the owner of the home, that would be a couple of other costs to note in having real estate holdings as if something big happens are you expecting a government bailout automatically? If you chose to use a property management company for dealing with most issues then be aware of how much cash flow could be impacted here. Are you prepared to have an account to properly do the books for your company that will hold the property or would you be doing this as an individual without any corporate structure? Do you have lease agreements printed up or would you need someone to provide these for you? You should absolutely go for it, and I encourage you to look for multi-unit (up to 4) properties if there are any in your area.  With nulti-unit properties it is far more common than not that the other units pay the mortgage. To comment on your point about slowly building an asset if the renter covers the payment; that's true, but you're also missing the fact that you get to write off the interest on your income taxes, that's another great benefit. If you intend to make a habit out of being a landlord, I highly encourage you to use a property management company.  Most charge less than 10% and will handle all of the tough stuff for you, like:  fielding sob stories from tenants, evicting tenants, finding new tenants, checking to make sure the property is maintained...  It's worth it. There fees are also tax-deductible... It makes a boat load of sense.  Just look at the world around you.  How many wealthy people rent???  I've met one, but they own investment properties though... Of course, I know nothing about real estate or owning a home. I would love to hear people's thoughts on why this would or would not be a good idea. Are there any costs I am neglecting? I want the house to be primarily an investment. Is there any reason that it would be a poor investment?  I live and work in a college town, but not your college town. You, like many students convinced to buy, are missing a great many costs. There are benefits of course. There's a healthy supply of renters, and you get to live right next to campus. But the stuff next to campus tends to be the oldest, and therefore most repair prone, property around, which is where the 'bad neighborhood' vibe comes from. Futhermore, a lot of the value of your property would be riding on government policy. Defunding unis could involve drastic cuts to their size in the near future, and student loan reform could backfire and become even less available. Even city politics comes into play: when property developers lobby city council to rezone your neighborhood for apartments, you could end up either surrounded with cheaper units or possibly eminent domain'd. I've seen both happen in my college town. If you refuse to sell you could find yourself facing an oddly high number of rental inspections, for example. So on to the general advice: Firstly, real estate in general doesn't reliably increase in value, at best it tends to track inflation. Most of the 'flipping' and such you saw over the past decade was a prolonged bubble, which is slowly and reliably tanking.   Beyond that, property taxes, insurance, PMI and repairs need to be factored in, as well as income tax from your renters. And, if you leave the home and continue to rent it out, it's not a owner-occupied property anymore, which is part of the agreement you sign and determines your interest rate. There's also risks. If one of your buddies loses their job, wrecks their car, or loses financial aid, you may find yourself having to eat the loss or evict a good friend. Or if they injure themselves (just for an example: alcohol poisoning), it could land on your homeowners insurance. Or maybe the plumbing breaks and you're out an expensive repair. Finally, there are significant costs to transacting in real estate. You can expect to pay like 5-6 percent of the price of the home to the agents, and various fees to inspections. It will be exceedingly difficult to recoup the cost of that transaction before you graduate. You'll also be anchored into managing this asset when you could be pursuing career opportunities elsewhere in the nation. Take a quick look at three houses you would consider buying and see how long they've been on the market. That's months of your life dealing with this house in a bad neighborhood. "Why go for an average two bedroom?  I lived for a few years in a low-priced 4 bedroom apartment that I shared with 3 other people.  I used the money I saved from living below my means to put a down payment on a duplex, which I used to ""live for free.""" Can't pretend to be an expert in construction or real estate but I'm pretty sure that you can approach the people you know and pay them on a per job basis. I'm pretty sure finding other workers on a per job basis will be easy. I wouldn't say its common but its not uncommon either. Mixing friendship and money, whether that's loans or landlording, is risky. Often things work out, but sometimes the unexpected happens, and it doesn't. If things go wrong, are you prepared to walk away from either the friendship or the money? After you've considered that, the next question is how your roommates feel about the deal. You're looking to charge your friends $2000 to rent part of a property that, from the sound of it, they could rent much cheaper from a stranger. Maybe the market is different in Cleveland, but in my area, I'd expect to pay $2000 in rent for a place worth closer to $300,000 than $100,000. Have your roommates expressed interest in the idea, and have you discussed dollar values with them? Are you still interested if they ended up paying $1600 in rent? $1000? This is almost exactally what the BK attorneys I work with have always said.  If you have trouble offer a larger down payment. . . . that is the point of the down payment after all.  You do sometimes have better luck with renting from individual people rather than larger corporately owned rentals.    There are options out there. I am a realtor. For our rental business, we use a service that offers a background check. It costs us about $25, and it is passed along in the form of an application fee.  I suggest you contact a local real estate agent who you know does rentals. Have a conversation about what you are doing, and see if they will help process the application for you, for a fee of course. If you are truly concerned about your safety (The text you wrote can either read as true concern or sarcasm. Maybe we are really in a wild country?) It's worth even a couple hundred bucks to screen out a potential bad roommate. "If you or they feel uneasy about you simply paying more rent than them for equal usage, you can work out an agreement where they ""pay"" in other ways. For example, I once lived with someone that made about double what I did, and so he paid more rent than I did. In exchange, I was responsible for cleaning the kitchen. If your roommates hate cleaning then you could substitute something like running errands, cooking, or looking after plants/landscaping. If they have some specialized skills then they might be able to provide those instead (car maintenance, financial management, etc.). Of course you'll want to agree ahead of time on what the conditions of satisfaction for the task are, such as how often the kitchen will have to be cleaned and what the definition of ""clean"" is. You also can't be a jerk and make their job extra hard, such as by completely trashing the kitchen every night.  Obviously it will depend on the temperament of your roommates whether or not they'll be happy with this or feel insulted being ""the help"". It worked for us because it was a task he hated and one I didn't mind, and it kept me from feeling like I was mooching off him. I would feel them out when you propose a possible rent and utilities split. If they feel like it's an unfair burden on you, but they can't afford more, then you could suggest this as a way for everyone to contribute equally. Whatever you decide to do, don't hold it over their heads that you pay more. Agree on something that everyone feels is fair, whatever that is. If you want a concession due to paying more (such as you get the garage, get to pick the art on the walls, whatever), then agree to that up front. Then accept that you've made a fair deal and they don't owe you anything beyond what you've all agreed to. It's awful to feel like you live in someone else's home and that you are getting into ever deeper debt with a close friend or significant other, and it will breed resentment. If you can't do that, then don't share an apartment with them at all. The most important thing is that everyone feels it's fair, regardless of the numbers. If you cannot get to that agreement through dollars alone, you can have them contribute to the home in other ways, such as cleaning, cooking, or performing maintenance. Just make sure that everyone truly does feel it's fair and that you are all equals." The time to have looked into this is before you bought the condo, not now. You are presumably an adult. Your parents have apparently made it possible for you to have a roof of your own over your head for what is probably below rental rates (but I don't know your area, so can't say). From their point of view, they may have been doing you a favor, while giving themselves an investment opportunity. What would they be doing with that money otherwise, and at a higher or lower rate of return, and with greater or lesser risk? Where and how would you be living otherwise? More Importantly, if you can't talk to them about this you have bigger problems than money. This has happened here in Austin, Texas. If the apartment doesn't have one, you can ask to have one installed and some will either do it or will do it if you pay for some of it (about the same price as installing the wall charger in a house) "In San Francisco (home of super-expensive real estate and more than a bit of marijuana use) you'll see people asking up front for ""first and last months' rent"" plus a security deposit when you move in somewhere. If someone can't come up with the cash, then it looks like this is the last month... and time to look for a new roommate. of course, it can be difficult to implement this arrangement if you've already moved in with a bunch of people, and if it's not common in an area people may balk at the money required up front, but.... it is a reliable way to deal with people flaking out on the rent money." I found [this.](http://homeguides.sfgate.com/terminate-apartment-rental-lease-due-medical-condition-8142.html)  It looks like you will need to go over the lease and look for any stipulations that allow your brother (or your parents if they cosigned) to break lease. You might want to talk to an attorney. Most leases stipulate a penalty to break lease, such as a month of rent. It seems unusual that they can charge rent until they find a new tenant, but I'm not a lawyer. Leases are an adhesion contract, meaning they are drafted by the landlord and they have most of the negotiating power. This is not inherantly bad, but it does mean that unusually harsh lease terms could be considered unconscionable, rendering the lease void.   I encourage you to reread the lease and contact a lawyer. I know everyone says that, but it's good advice here. It sounds like it would be cheaper than taking this lying down and I haven't heard of many people successfully winning contract law cases pro-say. It can't hurt to get a free consultation. Yes, but how does that compare to those with multiple houses?  I build homes in the Seattle area for a living and one lifestyle who own several rentals... One thing them do is use equity for their 4 homes to purchase another.. Writing off the the interest paid on the loan(s)...  I'm not saying it's a deduction normal people don't use... I'm just saying that it strikes me as a deduction that the wealthiest  landlords use more with better results... If you buy a townhouse, you often are in a condominium arrangement in the US (when you're really in a rowhouse in particular).  So that's a downside right away: you have to have a HOA, or at least some sort of common agreement, though it might not have formal meetings.  Everyone who owns an interest in the entire group of townhouses gets some say in landscaping and such. Beyond that though, townhouses (and similarly, condominiums) are often easier to own (as they don't have as much maintenance that you have to do), but more expensive because you pay someone to do it (the landscaping, the external repairs, etc.).  You likely don't have as much control over what the external looks like (because you have to be in agreement with the other owners), but you also don't have to do the work, unless your agreement is to collectively do the mowing/landscaping, which you should know in advance.   I wouldn't underestimate the value of easier, by the way; it's very valuable to not have to deal with as many repairs and to be able to go a week without thinking about mowing or watering.  In that sense it can be a nice transition into ownership, getting some-but-not-all of the obligations.  But if that's something you really value, doing the landscaping and mowing and whatnot, that's relevant too.  You can always tell your realtor to look for townhouses where the owners do some/all of the landscaping, though that opens up a different can of worms (where you rely on others to do work that they may not do, or do well). They're also somewhat noisier; you may be sharing a wall (but not necessarily, air-gap townhouses do exist) and either way will be closer to your neighbors.  Does noise bother you?  Conversely, are you noisy?  In a college town this is probably something to pay attention to. Price wise, of course stay well within your means; if being close to the city center is important, that may lead you to buy a townhouse in that area.  If being further out isn't a problem, you'll probably have similar choices in terms of price as long as you look in cheaper areas for single family homes.