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Oregon Road Conditions & Cams Email Story to a Friend October 4, 2005 Are rental properties worth the investment? By ANITA BURKE Mail Tribune Trent Nistler bought his first rental property on Easy Street, expecting all the good things the name implied. But when the friend he rented to left in the middle of the night with several months’ rent due, he quickly learned that being a landlord wasn’t as simple as he thought. He educated himself about managing rental properties, joined the Southern Oregon Rental Owners Association and got back in the game. Now owner of Trent Nistler & Associates Inc., a local mortgage brokerage, he regularly advises clients on buying rentals. Nistler and others familiar with the Rogue Valley’s rental market say most landlords likely won’t see regular income from their residential properties, but rapidly rising prices can make such an investment lucrative in the long run. Landlords who have owned property for decades might earn a regular income, as can those who put down 50 percent or more of a property’s purchase price, market observers say. Advertisement "You have to feed a rental," Nistler said, noting that landlords should expect to spend about $200 a month above what they make in rent just to cover the mortgage, taxes, insurance and other expenses. Randy Unger, a real estate consultant at Sierra Real Estate and president of the rental owners association, offers similar budget guidelines to his clients. "A lot of them gasp when I say that," he said. Both Unger and Nistler point out that property values in Jackson County have soared as much as 30 percent annually in recent years, making it easy for investors to build equity and recoup their initial investment and other payments made along the way. "Putting $200 a month in a retirement account is considered normal," Nistler said, noting that real estate investments recently have earned far greater returns than money market accounts. Rapidly rising real estate prices and the hopes of a big payday when a property is resold have attracted investors to the area. A spring study by San Francisco-based LoanPerformance, a mortgage finance and servicing research company, found 18.78 percent of homes bought in the Medford-Ashland area were purchased for investment purposes. Another analysis last summer by California business information company First American Corp. reported that investors bought 23 percent of the homes here. Lots of available rentals and generally low wages in the area keep rents below the cost of ownership, so landlords have to keep up the cash infusions, said Laurel Adams, owner of All Cities Property Management LLC and a member of the rental owners association’s board. "This is a very tough market to make it pencil," she said. "There is a group of investors that go on a dream and don’t have the money to make it work." She’s seen owners rush to rent places because they couldn’t pay the mortgage and have no reserves available in case repairs were needed. She even had to refuse to manage property for owners who wanted to cut corners and do "things that weren’t sanctioned by law." Still, she said, a fairly slim slice of landlords purposely neglect their properties and work to dodge officials demanding improvements. "As in all walks of life, there are a few who take advantage of people," Adams said. More common are absentee landlords who are simply unaware of what is going on at their property, she said. Nistler said landlords should consider their rentals a part-time job that requires education and involvement or hire a professional to manage them. "It’s not in their best interest to let homes fall into disrepair," he said, noting that it devalues that property and drives down values in the rest of the neighborhood, too. Medford appraiser Roy Wright said he couldn’t point to specific areas where a blighted home had dragged down property values, but generally a home in an older, west Medford neighborhood with numerous rentals can’t command the same price as a similar home in old east Medford. Reach reporter Anita Burke at 776-4485, or e-mail Are rental properties worth the investment? ">[email protected] . Requirements of rental housing Here are some of the requirements for all rental housing within Medford: Heat in all habitable rooms. Proper fixtures in kitchens and bathrooms, including adequate amounts of hot and cold water. Adequate ventilation for fuel-burning appliances. Smoke detectors. Functioning doors and windows. Structurally sound foundation, floor supports, walls, ceilings and fireplace. No public nuisance. The property cannot present a danger to human life or health, such as overcrowding or unsanitary sewage facilities. Safe electrical equipment, fixtures and wiring. Safe plumbing fixtures and equipment, including facilities maintained to prevent leakage or dry rot. Safe mechanical equipment, including motors, filters and vents. Proper weather protection, including walls, foundations, windows, doors and roof. No fire hazards, including any device that is part of the building or combustible waste or vegetation in the yard. — Source: city of Medford Mail Tribune Home | Local News | Sports | Business | Obituaries | Life | Opinion AP News | Archives | Site Map | Community | Classified Copyright © 1997-2005 Mail Tribune, Inc. All rights reserved. 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