Buying A Home
Dear Community,
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Renting our condo - questions!
I think we decided to rent out our condo instead of taking a loss and selling it now... for those of you who rented out, can you tell me about the process? Did you involve a realtor or did you do the work of finding a tenant yourself? What sort of screening process did you do?
Re: Renting our condo - questions!
We do not use a property management company, but that is always an option. For a fee, they will do all the work for you. My husband does all of our landlord stuff, but I know he uses an online company that does criminal and credit checks as part of the screening process. It is paid for by the application fee.
You have a condo so make sure you check with your HOA. We have a friend whose association only allows for x number of rentals at a time and they are maxed out so she cannot rent hers.
My Valentine Bookends (2~13~13, 2~15~09)
DH is a RE broker so we self manage all our rentals. We do criminal background checks thru our state's court system website and also use http://www.tenantalert.com/
Be sure you get a copy of your state's landlord/tenant laws so you know what you can/cannot do. Also check you mortgage paperwork to be sure there is not a stipulation in it that says you are not allowed to rent out property.
When looking for tenants, we usually use Craigslist and local newspaper ads.
We use the standard rental agreement for our state which is what a RE attorney will more than likely use.
Some expenses you may incur when readying for a new tenant: general cleaning, carpet cleaning, painting if necessary, mechanical maintenance. Other things: yard maintenance and snow removal if this is not covered by your HOA fees.
Same here. It is WONDERFUL. They did all the leg work and take care of any repairs, general stuff like servicing the furnace, etc. We pay 10% of the rent each month to them, but even with that we can cover our mortgage on our place and insurance/HOA fees, etc that we pay.
It is SO worth it for us since we are out of state...but didn't want to sell as this is only a 2 year position that DH has right now so we may move back.
View our FOR SALE items
http://tinyurl.com/3jjv7vy
Some good info from other posters.
We rent a condo, we do not use a property manager. We're renting at a loss - our rental income doesn't cover our expenses but is still the best choice for us based on how much we would lose if we sold right now. We didn't want to lose even more money by paying a property manager. In my area, most property managers charge one month's rent as a fee to find/screen/place a tenant, and then 10% of the monthly rent as a management fee.
The HOA at our condo has some fairly strict rules about renting, so you really need to check with your HOA before doing anything. Depending on your HOA, you might not even be allowed to rent. Our HOA has a rule that no more than 20% of units can be rented, and we're now at that maximum, so no one else can rent their condo until we fall back below 20%.
We are required to use a lease provided by our HOA, so we didn't have to come up with a lease on our own.
We have found tenants on craigslist. That's where most people in our area find rental housing.
We do background & credit checks through e-renter.com. It's $29.99 for both. We charge applicants a $30 application fee to cover this cost if they don't pass the check or decide not to rent from us. We apply the $30 toward their security deposit if they do rent from us.
As far as maintenance, there's less that you're responsible for as homeowners with a condo. We have only had one maintenance problem (knocking on wood) in the 2+ years we've been renting, and it was an issue with the central heating system, so the HOA was responsible for fixing it, not us. It's easier to rent a condo than a single-family house from a maintenance standpoint.
We haven't had many problems being landlords, but we also live 10 miles from our rental property. If we lived further away, we would hire a property manager, at least to find/screen tenants. Finding & screening tenants has been the most time-consuming part and would be even more difficult if you lived far away from your rental property.
Mr. Sammy Dog
why is making a profit important?
Depending on the situation, that isn't the most important/first factor to look at.
Once you turn it into a rental property you can write off the loss on the principal. You can also then sell the house for a loss and while you still have to pony up the cash, you can write off as a business expense and take it over several years if necessary. The association dues, assessments, etc all become business expenses as well.
For us, it was a very MM thing to rent out my condo then sell it after it was a rental.
If the property doesn't at least break even it will be a "money pit" until the property is sold. Values have been going down, and could continue to go down. So in the end, it could end up costing you more once you had enough of "making up the difference" each month. Also, it's more difficult to sell a rental property. Tenants won't care to tidy up when buyers come in. The place won't be staged unless you wait until the lease is up, then clean up, and then list. During that time, you are getting ZERO rent and buyers may offer even less when they see the home empty and feel they have an edge over a desperate selling losing money every month.
Regarding the loss and write-offs, it's not as rosy as you are making it out to be. Your cost basis is the value on the property when it was placed in service as a rental. It's not the price you paid for it when it was your personal residence. So you will not be able to deduct the full loss that you paid for the property vs what you sold it for. You also have to subract depreciation that you deduct each yr on the house from your cost basis so your "loss" writeoff is even less. And remember, these losses and expenses are being deducted against your rent roll which is being taxed as income. It takes a lot of deductions to offset paying taxes on all that rent.
View our FOR SALE items
http://tinyurl.com/3jjv7vy
I understand that, but it was more than that rosy for us I guess. We received several thousand dollars back the year we sold. Also, your rent roll is only taxed as income if it makes a profit. If your losses every month on other fees (not interest) cancel out any profit or you have major expenses then there is no profit to tax.
Also, for some people, breaking even or even a slight loss is better than a) going into foreclosure or b) paying to have a vacant property so making a profit wouldn't be their main priority either.
I'm not saying it isn't complicated, I'm saying that becoming a reluctant landlord doesn't mean that you have to have a business plan that shows it as a money-making endeavor.
One thing we did when we were looking for a renter was to go to a nearby apt complex that was comparable to our condo. We went in to get info as potential renters and got all costs and sq footages, etc fromt he office. We then drove around and copied the addresses off of each of the buildings. Used that info to make a mailing list for a flyer sending it to "current resident at"
In our flyer we had the info in ours but also showed the ways ours was a better deal "1 car garage, full basement, no trash fees, etc" and advertised an open house. We got about 30 hits from that mailing. We rented it to a guy from that complex and he then bought it from us a year later.
I concur. Making money on a monthly basis is not the only factor to consider.
For us, we could lose $250 a month by renting our property, or sell it and go to closing with roughly $60,000 (that's a best-case scenario estimate, it could be more than $60K). While we could pony up the $60K to sell, it doesn't really seem like the best use of our money. We are not willing to let the property fall into foreclosure and we wouldn't be approved for a short sale, so unless we want to sink $60K or more in cash into the condo to sell it, renting is our best option.
We do not end up paying income tax on our rental income because our deductions (HOA dues, mortgage interest, utilities, depreciation, etc.) are more than our rental income.
We do not get to claim the $250 monthly loss on our income taxes. Some people can, but there are income limits and we are not able to write off that loss because we're over the income limit.
Mr. Sammy Dog
That is most certainly a tough situation. 250 a month assumes you rent it 12 out of 12 months I assume. So that is a loss of about 3K a yr minimum. Over 5 yrs that is a loss of 15K, 30K over 10 yrs. You are banking that the market will recover and your home will increase in value at least those amounts in those time frames. It's a gamble, and if the market stays flat or drops, it may cost you more in the end. The point I was trying to make is although it may be easier to cope with now, it may just be putting off the inevitable later, and that may be worse than today. Of course you have to do what is best for you at the current moment. I was just explaining both sides to the concept of renting without breaking even or making profit.
View our FOR SALE items
http://tinyurl.com/3jjv7vy