My lessons learned and recomendations for being a live in landlord:
1. It can be difficult if your tenants know you as the landlord and as their personal neighbor, especially if he has to evict anyone. I could tell you some horror stories. But they were all good lessons learned in tenant selection. There is an advantage to being a live in landlord. Any tenant who isn't comfortable with it might have something to hide. A lot of tenants like that I am so available if there is a problem or if they forget their keys.
2. Go for a duplex of two 2 bedroom apartments. I have found that they are more desirable for resale and the tenants you attract for a 2 bedroom tend to stay longer than in smaller apartments. Try to find something where the utilites, especially the heat, are seperated by apartment. Special note about water in Philly... Water is a lienable bill in Philly. So if the tenant doesn't pay the water bill, then it can be liened against the property and hence the landlord to take care of. If the water is seperated out, get the bill set up in the owner's name and have the tenant pay the owner directly for it.
3. Be very diligent in tenant selection. I prefer to show the apartments myself and as I go along I ask lots and lots of questions. I refrase questions and ask them again and again to see if I get the same answers and does everything they are telling me make sense / add up. I double check what they tell me against their credit reports. Sort of like being a detective. :-) I have found a wonderful company called Landlord Association of PA. I pay a small annual fee and pay for credit reports as I run them online. You can even do an eviction search (which I highly highly recomend.) They also offer other services for landlords who have been burned by tenants. Here is their website: http://landlordassocpa.com
4. Taking maintenance calls can be annoying, but if you find a good handyman and are willing to maintain the property, it's not really that bad. The maintence stuff he encounters will likely be the same sort of stuff he will encounter as a normal homeowner. So if he can't do the work himself, he will be hiring someone else to do it whether it's a rental or not. Check into Angie's list for a recomendation for a local handyman. A handyman will be less expensive than a specialized contractor. Bring in the specialized contractor for the biger stuff like a new roof, new heater, electrical, etc. Get the handyman to do the smaller stuff like a leaky faucet, etc. Of course allways check with the city for permits, licensing, insurance, etc. Another resource for a contractor or handyman is service magic. Service magic is more of site where the contractors subscribe to it, but they do a 7 or 10 point check on them including references & insurance. Angie's list is entirely by recomendation only by members. A contractor can't put themselves on there for advertising.
5. Damages & repairs: Be diligent in tenant selection and try to get 1st month, last month and one month security deposit. I've had bad experiences with pets so I don't do it. If you do, take a seperate pet deposit.
6. I found the book Landlords' rights and duties in Pennsylvania by Gerald S. Gaetano & Mark Warda to be very helpful when I first started out. I also love the PA assoc. of Realtors lease form. There is a stationary store off of Broad and Chestnut that sells plain language lease forms for PA. Email me and I'll see if I can dig up the name and address. I've been using the PAR lease form since I became a realtor.
Real estate is still a great investment, especially in the long term. Good luck and I hope that was helpful.
Long & Foster Real Estate, Inc.
Being a Realtor who happens to be 22 and has owned property since I was 18. I recommend starting off with the duplex. However, my first property was a row home that I still own in West Mayfair. Here are my reasonings. It sounds like your friend wants to live in the property that he is buying, if you have a tenant, that always helps with the payment. The downfall is that you will want to make sure they are going to be good on making the payment ever month. I recommend pulling a credit report with their notice of course. Either, way there are plenty of homes on the market and I would tell your friend to start looking around. To give you a heads up, I have a Corner Tri-plex listed on the market. (3038 Tyson Ave) Very nice.
Tell your friend to give me a call.
"Third Generation Realtor"
Coldwell Banker Hearthside
A lot depends on your friend's comfort level with dealing with people, problems and glitches. Landlording can be a great equity builder- but it is not without 'costs'.
Here are some things to consider when 'landlording':
BIG PRO #1--Helps pay the mortgage, or even make double payments - which may mean that you can build equity quicker (to use in your next purchase?)
- being nearby may make it possible to do fixups/improvements to both sides of the property (building more equity:-))
-Having great neighbors and becoming friends.:-)
-May be able to subdivide property and have some immediate profit, as most times one side of a duplex is worth more than 50% of the 2 sides as single unit. Or fix up the side that you are living in, then move to other side and rent out the 'owners apt' (for more rent!)while you repeat the process.
BIG CON #1: Tenants who don't pay (or are late)..and eventually need to be evicted.:(
Hassles with your 'neighbor' -- the buck stops with you!
Taking the "Management calls'-Taking care of the calls about broken plumbing, no heat, complaints about the neighbors, things that-go-bump-in-the-night,appliances that need fixed....
NOT taking the management calls and paying someone else to do that! .. which eats up some or all of your profit/equity.
It is a part time job. How much is the job of landlording worth to you?
Hope that helps.
PS. DO ask around and find an experienced Realtor to assist you. A good one is worth their weight in, well maybe not gold, but at least a little silver!