Buying A Home
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
so...tell me everything you know about owning a rental
Our current home is in a desirable neighborhood but is too small for us. From my research online (looked at current rentals in neighborhood) we could make a profit as rents are currently being charged at more than what we pay for our mortgage + annual tax and insurance amounts.
We would live close by, no more than 15 minutes away, so would be able to deal with most everything ourselves. We also have a contractor who we employ quite often; he's familiar with our home and if any repairs or what not came up, we would hire him as our handyman.
Tell me all of the pros/cons!
Re: so...tell me everything you know about owning a rental
Jewel, would you mind taking this one?
I'm studying for finals.
Pook, I know you haven't been around much lately, but this question gets asked pretty often and I'm the Rentals Are The Devil representative and Jewel's the Rentals Are Great representative. Hopefully she can link to some of our previous back and forth posts for you. GL with whatever you decide. Great to see you around again.
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Thinking of doing cosmetic updates to a dated home? These were our costs.
we are eventually going to rent our house not quite ready yet
just make sure you have a good rental contract, are you going to include utilities?
TarHeels and I are writing a How-To book....stay tuned.
There's so much to know about owning a rental. I'm on my way out here soon, so I'll have to give you the Reader's Digest version tonight.
- Manage the property yourself, if you can
- Get a great rental contract and make sure to do credit checks. SmartMove through TransUnion is a good one.
- List your rental at a price that will get a pool of interested renters. You're better off if you can choose the best of the bunch
- Require a deposit that is as high as the market and state law will allow
- Get excellent landlord insurance. This is different from your current policy. I recommend an umbrella policy as well. Read your coverage very carefully, as it can affect certain rental situations (pets allowed, businesses on site, etc).
- Be ready to be strict about rent, and have a clear late payment policy
- Keep records and receipts of everything related to the house
I am very happy with our rentals. I do think they are super great
We are diligent in our work, but mostly we have just lucked into really awesome tenants. I send them cards with gift cards at Christmas and lease renewal. Having good tenants is really what makes it. We have also lucked into zero repairs in the past few years. The general idea is that after both are paid off in 25 years, we'll have almost 100% profit. It's part of my retirement portfolio.
If you have more specific questions, there are several experienced landlords around here who would be happy to give advice and different perspectives.
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I saw your post on MM as well, and it changes my perspective a bit.
If you have significant equity in the home now, you are in really good shape to sell.
I would not start a rental with the intent to sell in a few years. You may gain some additional equity over the next 5 years or so, but you will also be liable for any repairs, damage from the renters, etc. during that time. Trying to sell a house while occupied by renters is no fun either. In the span of a few years, those costs could easily negate any additional equity you've built in the house.
If you plan to keep it as a long-term rental, then it could be a great idea. You just need to make sure you view it as a rental, and not a placeholder until you can sell at a higher price. You have to be really dedicated and interested in being a landlord. I love it, but it's definitely not for everyone.
I don't post here much but was lurking this board and wanted to share a problem my dad had. My dad has 9 rental properties and just from knowing his experience my biggest tip would be to research how easily someone can be evicted if there are problems/lack of payment. He has his 9 properties all in the same county here in IL and got a 10th property in a different county assuming the laws were the same. Well they weren't and it took him over a year to get a renter who stopped paying evicted, so he had to pay the monthly mortgage that entire time, on top of some pricey lawyer and court fees. In the county of the 9 properties, he can have someone evicted in 30 days, no problem, at a very low cost.
Also be prepared to have to do major remodeling in between each renter. This isn't always the case, but be prepared for the worst case scenario and be pleased when it isn't that bad. But he seems to like to do it because he's not in any rush to sell the properties and he could double the initial pay price on each home by now.