View Full Version : Is it worth keeping a property as a rental?
07-20-2011, 04:44 PM
The market has all but stalled since we put our home on the market. We're going to try a couple more months with a price reduction, but after that we would consider renting.
I just don't know if it's worth it - dealing with a rental house was kind of a last resort to me.
But - our agent said it's a viable possibility with the chance of actually making a little money while renters pay down the mortgage...she herself has kept her old homes and rented them out and has offered to help us manage the property if we were to do it.
In order to make it work, we'd refinance it to get the lower interest rate, then we could potentially make on the order of $100-$400/month on it. Renters are plentiful here. Good renters would be fairly easy to come by based on the price range of our house. It's also in an exemplary school district.
Any BTDT? I like the idea of maybe earing a couple hundred each month while someone continues to pay down the mortgage on the home. And the tax write-off. I don't like the idea that we'd be owning 2 properties that we'd be responsible for. And the possibility of getting a bad tenant (though there are lots of ways to weed out the bad ones). And dealing with changes in tenants every year potentially. But - assuming we could (almost) always have a good renter in the home, we could potentially sell it years down the road and have the money go towards the girls' college tuition or something...
07-20-2011, 05:20 PM
Owning two properties was one of the most stressful things I have ever done, so I would say don't do it. However, if there are no other options in this market, I would rent it and hope to cover the mortgage with that payment.
I just hated paying real estate taxes for two houses, paying for repairs in two houses and dealing with our tenant (who was great overall but really annoying to deal with). I also was on pins and needles until we finally unloaded the first place. It was very stressful for us and we did not even have kids at that point!
We looked into this a bit.
When you say you will make 100-400 per month are you factoring in 1) vacancy - - let's say at 25% on average (it may be less but I would factor high); 2) repairs- - you can tax deduct but of course that is only a portion of the cost and you are still out of pocket; 3) increase in property tax because the property is no longer owner-occupied?
Also, while you get some tax breaks (depreciation) as I understand it you need to essentially repay that when you sell AND when you sell you lose your capital gains exclusion for owner-occupied property (so I believe you would pay tax on the profit if you have not occupied for 2 of the past 5 years or some similar formula).
I don't think it is a clear no at all but I would just be sure to run your numbers accurately, factoring in what I have described above.
07-20-2011, 05:27 PM
It can be easy, it can be stressful! Depends on the tenants, what happens when you are ready to sell, and can you afford to pay 2 mortgages if it sits empty? We rented our house out for about 4 years, it was good while it had tenants but our property manager was a jerk and did not tell us that the tenants had moved out and so we were a bit shocked to be paying the mortage with no income for a while. We sold it in the end. If the market is bad, I dont think it's a bad option. It seems better to rent it out than lose alot or let it sit empty for months on end.
Good luck with your decision.
I would definitely say no pets, I hate to say this as a previous renter with a wonderful dog that did no damage and struggled to find a place that accepted pets, but I have seen the damage they can do and I would not allow pets again on a rental.
07-21-2011, 08:40 AM
When DH and I got married, we both owned our homes. We opted not to sell and kept his house as a rental. We consider it a long term investment. In 5+ years, it has only be vacant maybe a month or two. Yes, it can be a pain but we've been lucky with fairly good tenants. It helps that DH is handy so is able to do most of the repairs himself. We pretty much breakeven cashflow wise. We choose to hold on to it because we are building equity and it's not costing us anything to do so. If the market was better, we probably would sell and buy another investment property a little bit closer to our current home.
Based on what you wrote, it sounds like you will still hve some taxable income since you'll be making a couple of hundred dollars a month. keep in mind that only interest is deductible, not principal on the mortgage. But some of that should be offset by depreciation, which as someone else mentioned does need to be "paid back" when the property is sold, unless you buy another property.
07-21-2011, 09:00 AM
No, I have friends who have done this and bad tenants are a royal PITA! One bad tenant can completely trash your property and cost you thousands of dollars, not to mention massive headache. There are also laws that can protect the tenant from being kicked out, even if they suck. It's not worth it. I'd rather sell a property at a loss, than hold onto it, try to rent it, risk that we get a crummy tenant that causes all sorts of issue.
07-21-2011, 09:13 AM
This question can not be answered on a message board. Without full in depth knowledge of your situation and the market you are in, any answer you get here will be incomplete. I would suggest speaking with your CPA to do an analysis of the pluses and minuses financially and then to look within as to whether you want to be a landlord.
07-21-2011, 01:11 PM
It would depend on whether or not it would cash-flow. We have 3 rentals and have not had any problem keeping them occupied. The longest we have gone has been a week or two and we have had mostly long-term tenants. It's been an excellent investment for us.
07-21-2011, 04:13 PM
I have no advice, just to say we just put ourselves in the same position. Instead of the huge loss in payment every month, plus living here, we rented our old house out.
Doing the background, investigating, etc on the people who called was a pain. Our RE agent knew a couple new to the area looking for a place to rent, but wanted month-to-month. He had a great job, a plant manager at a brick making company.
I had to talk DH into getting on board, we went with the month-to-month couple. Our RE agent had spent alot of time with them, did background, etc. for us. She will take care of any problems since we live so far away. I feel alot better knowing there are very decent people in there. Some tenants will completely trash your palce, others treat it great, it depends on who you get.
Know your states rental rights, the rights you have. If you live nearby I would feel a bit more comfortable, I would do alot of interviewing, going by impressions you get from people, again check the law and put every clause you are allowed to in there.
Our complex has some renters that are less than desirable. We're in FL, the owner is in MS. I talked to him today, he is checking out all the laws/rights he has to do an unannounced walk-thru, well, his friend down here.
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