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.
Buying to rent out later?
Hi,
I am new to these boards, I'll try to be brief...desperate for some stories from real people. My husband and I have lived in this area for a few years now, and plan to for a few more years (2-4) while I wait to get into a grad program. His parents want to finance a down payment for a home for us. We would pay them back over time. My husband wants to rent the home out (through a property mgmt. company) when we leave the area. Is this a good idea? I am worried because I hear all sorts of horror stories about being landlords. However, the area we live in (northern colorado) has some of the best rental stats in the nation-4% vacancy rate, a large university nearby, SFH rental rates (for 2-3bdrm) typically between 900-1400 per month. We are also not looking at crazy-fancy homes, just basic 2-3 bdrm. homes without any frills. We assume that if it's going to be a rental, better not to get something that's pricey to repair. Sorry this is so long! Any thoughts/opinions/stories (good AND bad) would be appreciated!!
Re: Buying to rent out later?
Welcome to the nest
I'm turning into one of those salty old regulars who's short with newbies, but it's nothing personal - I just have to run.
This isn't a good idea for many reasons.
1. If you need to borrow money from family, you're not ready to own a home. The only exception I make for this is very high cost of living areas where a modest family home costs the better part of a million dollars. I don't think that's true even in Aspen, so if you're in a reasonable COLA, you should buy a home when you can pay it for by yourself, and not before then.
2. Let me assure you that owning a rental property while in grad school in unpleasant. We own 2, and last year, we made $9,000 in necessary repairs and another $4,000 in while-we're-at-it upgrades. $13k is a helluva lot of cash to come up with on one income when things are already tight.
3. Being a long-distance LL sucks. Phone calls, emails, texts to all the people you've hired and you're trusting them to do right by your property. Sometimes they will, sometimes they won't, but you won't always be able to get back and check that your $X00,000 investment is in good shape. And other people's definition of, "oh, yeah, it's fine," may differ dramatically from yours.
4. Would you really want to live in a house that would appeal to undergrads that "wouldn't cost much to repair?" I wouldn't.
My Pinterest
The Googlesites Paint Bio
Thinking of doing cosmetic updates to a dated home? These were our costs.
I have to agree. It doesn't sound like a great situation (borrowing money, being in school, living long-distance, etc.). Just sounds like a recipe for trouble and frustration!
My Valentine Bookends (2~13~13, 2~15~09)
When I was a senior in college I live in a house where the landlord lived OOS and had a management company take care of things for him. It was a PITA to get anything fixed; I'm just glad I lived with some handy girls or we'd have been SOL.
I agree with pp and say it's a bad idea especially since you can't afford to buy it in the first place.
We have three rental properties, two condos out of state and one SFH near where we live (it was our former home, not bought to be a rental but we decided we preferred not to sell when we moved due to current market conditions so we're holding on to it for a few more years).
I would never buy a home I couldn't afford without help from family. Too many expenses that can crop up. We've had numerous unexpected plumbing problems in our current house, there are always chances of major appliances breaking (one condo needed a new water heater recently, the other had the washer/dryer unit break, the SFH required a/c service two years in a row). We're older and DH has a stable, well paying job...I can't imagine dealing with this emotionally or financially otherwise. I know when I was in grad school I would have gone crazy.
I also would never buy a property intending to rent it to college students. Assuming they could afford the rent on a SFH, I just don't see most of them keeping it up, at least not to my standards. Repairs could be costly and even if their security deposit covers them, you're losing time (and rent) between tenants if you end up having a lot to do to the property. Or if you start out with something at that level, would *you* want to live in it for a few years, first?
Finally, being an OOS landlord is tough. Are you willing to deal with middle of the night phone calls? Make trips to see the property if there are issues and/or when a tenant moves out? Otherwise you have to pay a property manager, which will cut into your profit (assuming after expenses there is one to begin with). Even if you do it yourself to save that $$, if you can't make a trip for small jobs due to distance, classes, etc. then you'll have to pay a handyman to go in and do something that he'll charge a good bit for when you could have done it yourself for $5 if you were there.
I'm not anti-landlord seeing as I'm married to one, but honestly in the OPs situation it just doesn't sound like a good idea to me.
don't do it. We are in the situation out of necessity since DH graduated with his PhD and we moved across the country for his job. It SUCKS, and we have excellent tenants and a great property manager! It's a worry of what will go wrong that we'll have to pay for that we can't control, what happens if something goes wrong with the tenants and we have to find new ones, etc etc. It's a constant stress even with a local manager to do the day to day stuff...I'd love to sell the house and be free of it but we are so underwater we can't.
I know I'm coming late to the party, but I wanted to throw in my 2 cents! Another vote for no, PP have already discussed the landlord/tenant issues, so I thought I'd address the gift money issue. Because banks want homebuyers they know will be able to afford a home, they don't want people lending homebuyers the downpayment, a debt that the homebuyers will then have to repay in addition to the mortgage. And banks tend to not like that, they want to be paid first! : )
I live in a very HCOL area and my parents are helping us with gift money for a down payment (as my mother said, better to use my inheritance on me now while she can still enjoy it!). They had to sign several documents stating that it was a gift and that they will never expect us to repay it, that's the only way our bank will allow us to use the gifted money. We also had to prove that we had at least 5% of our home's purchase price in our own bank accounts, this is to show the banks that we could afford the house, regardless of the gift money situation.
So anyway, those have been my experiences dealing with gift money for downpayment from parents, hope it all makes sense. Good luck with your decisions!
Edited by moderator.