Anyone have rental properties?

[Erik88]

If I end up getting this job back in Knoxville we're torn on what we should do with our house outside Orlando. We paid very little for it and our Realtor has stated we will leave a lot of money on the table if we sell now vs. 2-4 years from now.

 

If we sell right now, it's going to be very close as to whether or not we will break even or make $3-5K. Personally, I just want to walk away with enough money for a down payment on another house. We owe $135K on the house and it's worth $150K. After all the fees it could go either way. 

 

I'm confident we could rent the house for $300-400 more than our monthly mortgage payment.

 

One more consideration is that the house is 11 years old and has the original AC and roof. Within the next few years it could end up needing both of those replaced which could cost quite a bit. 

 

My co-worker rented his house out and used a leasing company. They did a background check but the renters stole everything down to the ceiling fans. He ended up having to walk away from the house because of it which ruined his credit for 7 years.

 

 

 

 

[babelt]

I work for a bank that decided we were going to rent out a few of our bank owned properties we were sitting on. We have done fairly well and most of the properties are actually 2 hours away. I couldn't imagine trying to rent out one property when I lived 10+ hours away. Just think about when things go bad or break. With multiple properties we have handy men that are loyal to us because we always call them and they get quite a bit of work from us so they are speedy to get out. Again like you said you have to worry about someone destroying a property. We have had a few of those. I would say if you don't have any close friends or family that could watch over the property for you while you are back home just dump it now and save for a down payment. It will be easier than trying to rent a property out. Just my opinion. Sent from my DROID RAZR using Tapatalk 2

[Ugly]

I've got some experience with your scenario. I've done it twice, first time I vetted the tenants and they stayed 10 years. Only reason they left is because I had to sell it due to divorce.
2nd time we hired a property manager. Apparently they didn't check them out very well, after 3 months they stopped paying the rent. Had to go through the process of eviction. Very costly, takes a long time, a lot of damage and we were out 12+k in losses.
You can do it, just be picky, if you hire a company, check them out as much as possible!
This day and age, I'm with you, I would rather just sell it. Who knows what tomorrow brings.
Good luck

[analog_kidd]

We have 2 rental properties, but they are right here in town, and we bought them to be rentals, so our situation is a bit different.

 

If I were in your situation and decided to rent it out, I think I would go with a management company. The renters won't even know you exist, they'll deal with the company. Of course the company will take probably 10% of your rent, plus you're still on the hook to pay for repairs.

 

If you're making $300 a month, I think I would put all of that into a savings account and get ready for a new roof / AC. Although 11 years old is not bad for a roof these days, and an 11 year old probably still has a few years left in it too. Keep in mind you can also deduct the repairs from your taxes. 

 

Getting good renters is always the thing with rentals. We do all our own interviewing of potential renters, and my wife has a finely tuned BS detector behind her left ear, so we weed them out. We are very strict about no smokers or pets. I don't care if they have never once smoked in the house because their wife has emphysema, if they have even a hint of smoke odor on them, we won't consider them. Little Foofoo is the absolute best dog in the world and has never even laid on the carpet?. Glad you have a nice dog, see you later. To do that, I've left a house empty for a month while looking for the right renter, I'm willing to take that hit on income. Living far away from the property you may not have the luxury of personally interviewing each renter.

 

If you do rent it out, read up on "Depreciation of Basis". It's a tax thing, that you need to know about. Basically it's a break you get on your taxes every year, but then you pay capital gains on those breaks when you sell it. It's not terribly complicated, but the IRS expects you to claim it, and WILL charge you the capital gains when you sell it.

 

Good luck

[Erik88]

Thanks for the info. If I could rent it out to someone I know and trust it would be fine but I just don't trust many people. I do have a few friends that life close to the house that I know would check on it for me. But like you all said, if something goes wrong I'm going to have to rely on them to help me with it. Decisions, decisions.

[Hershmeister]

Given the low cash flow you will generate with the rental income, and the risks of future repairs, and vacancy, i would sell the property and call it a day. Your downside scenarios seem much worse than any upside.

[peejman]

I've never rented out a house I own, and I never will. A handful of friends and coworkers have tried and the best case has been one that almost broke even. The others have lost piles of money in repairs and even attorney's fees.

I do know of a friend of a friend who basically pulled the "slum dog millionaire" deal. He bought old apartment buildings, lived in them while he renovated them himself, then rented them. By the 3rd or 4th building he had quite the pile of cash. That's the only success story I personally know of.

[Patton]

After seeing what my parents went through with their rentals I would never rent a house unless I lived next door.

[Howler]

Don't trust anyone, especially a third party leasing company. Sell and be done. A friend of mine got caught up in a deal where he thought a leasing company had evicted his renter. The electric had been shut off for months. The house looked next to abandon so my friend went in and cleaned out his house of items that were left behind. Guess who got to ride in the back of a police car and pay top dollar for all the items that were put in a dumpster.

[tnhawk]

If it's a great deal to hold on to the house for 2-4 years, maybe the Realtor should invest in it.

[Ugly]

It can be brutal, besides trashing the house they stole our pool pump, filter and Polaris cleaner. Oh yeah, they ripped our inground pool liner too! Edited July 6, 2014 by Ugly

[analog_kidd]

There's an emotional aspect to renting your "home", as in a place you have raised kids, had Christmas at, etc. It's difficult to see someone else living there. We recently moved to a new home, and briefly thought about converting the old house to a rental. Neither my wife nor I could get past the idea of having to come to a repair and seeing someone else living in our home.

 

If it is an upscale home, with lots of nice stuff in it, then it's probably not going to be a good rental. Renters will not take as good of care as you did on the house. That pool that you took loving care of will be green and full of leaves. That beautifully landscaped showpiece backyard will be overgrown with weeds. They'll run the A/C at 60 degrees. They'll lose your garage remote. You get the idea.

 

Our rentals are very basic. They are comfortable, well maintained houses, but have no amenities outside of a dishwasher. I put a lot of blood and sweat into fixing them up, but at the end of the day, they are an investment and a way to make money. If a renter burned one down, I'd cash the insurance check and not shed a tear.

[Mike A]

Given the low cash flow you will generate with the rental income, and the risks of future repairs, and vacancy, i would sell the property and call it a day. Your downside scenarios seem much worse than any upside.

This exactly.

[runco]

Thanks for posting, very informative.  We are in a similar situation.  We are seriously considering buying a larger home, and our current home is within 5-7 years of being paid for.  Our new home would be 2 miles away.  Seriously thinking about renting our current home, but reading posts like these makes me really think what we are getting into.  Plus, wife and I, are not good at BS detection, and have soft hearts for people in serious financial troubles!

Edited July 6, 2014 by Runco

[McGarrett]

It can be done but it's not easy. My rental house is next door so I can watch it closely. We've been renting it for 12 years. Don't count on making too much of a profit but you should be able to hold your own.

 

Check out the renters closely, credit, criminal background, etc., there are services that can do this for you. make the renter pay for it when they apply. Go with your gut. Be very selective and price your property a little more than the going rate. Make sure you get enough of a security deposit.

 

Like anything worth doing there is a risk.

[southernasylum]

What analog_kid said. Even when our rental was already paid off it was just a small source of income and a huge source of stress. I am happy to be rid of it.


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[RobertNashville]

While I'm living in Savannah I'm renting out my home in Murfreesboro to a family I've known for many years but only because I intend to return to my home and because I know these folks very well; were it not for that I would never want to be a landlord with my rental property hundreds of miles away.

 

If there is any way that you can brake even or even just come close I'd sell your home in FL.

[eRay]

In my case the renter had a good job with the railroad and seemed like a good bet. His check for the deposit and first months rent bounced. 6 months and several attorney fees later we got them evicted. Left about 100 bags of garbage in one bedroom and 2 worn out sofas behind. Went to court and sued him. Got a judgment for $3600. Judge allowed them to pay it at $100 per month. They made one $100 payment then declared bankruptcy.

 

I have one rented now. The renter has paid on time every month so far ( 6 Months ). Still had problems with the sewer stopping up. The plumbers dug it up 3 times before figuring out it was a problem with the utilities departments main. Utilities department repaired it after the lawn had been dug up 3 times .

 

I rented out a house several years ago and had to evict the renters because all the neighbors were calling me complaining about how loud the tenants were.

 

I don't think that I will ever rent out anything again.

[tnguy]

I would not recommend renting from a distance (and I have ended up with two). It can be done but you end up relying on others to an uncomfortable degree. If it wasn't for the housing market at the time, I would have sold and blown it all on guns, hookers and booze bought closer.

 

I do understand the inclination to hold on to a property with sentimental value. One of mine is the old family home. But in the end, it's just a house.

Edited July 6, 2014 by tnguy

[No_0ne]

Many here have already posted about the problems and risks of long-distance renting, they pretty much nailed most of the reasons not to attempt that.  Another reason, paraphrasing something I once heard on Dave Ramsey's show, is this:  If you lived in Knoxville now, would you buy a house in Florida for a rental?  Obviously, few of us would countenance doing that, sell the house and walk away.

[10-Ring]

The possible reward does not outweigh the risk in my opinion.  If I were in your shoes and was looking worse case senario at losing five grand if I sold it now I'd be signing the papers and moving along.  I lost a close friend on a similiar deal.  I rented him a property my family owned at a great rate, he was to look after the place and make some repairs in exchange for the cut rate rent.  In the end he never paid any rent and had the heat jacked up to 80 once it got cold since we were still paying the utilities.  The place was in worse shape when we evicted him than when he moved in.  This was a person who I trusted. 

 

Same property a few years later.  We had a leasing company keeping it rented out.  Finally my family decides to sell the place.  It had been rented to various tenants over the past 6 years.  The place was in horrible shape.  It pretty much needed to be gutted and rebuilt.  When you factor in the HVAC units that were purchased for the place, a new roof, and other miscelanous repairs, money was lost on that particular property.  My point is if you rent, even to a trusted friend you could quickly loose in excess of five grand in damages.  I'd say cut your losses and move on. 

[Dane]

Wow so many negative stories and yet people make tons of money on rentals every year. I've had rentals as have my parents. I think their longest tenant was 20+ Years and my step mom basically gave her the house before she died. I had a duplex and had good luck with it. I believe a lot has to do with your rental price. The lower the price the worse the renter. Sent from my iPad using Tapatalk HD

[tnguy]

Definitely nothing wrong with renting in itself. You can have bad tenants and the occasional downside but in the long term, you should come out ahead. Keep some funds set aside for repairs and taxes so you don't get unpleasant surprises when the inevitable happens and make sure to keep good renters happy and it can be quite pleasant.

[monkeylizard]

What no_one said. If you lived in Knoxville, would you buy a house in Orlando to generate rental income to pay for your Knoxville mortgage? Although the steps are in the reverse order of what you're considering, the end result is the same.

[midtennchip]

Before renting the house, make sure you check the mortgage document. There has been some recent issues with mortgages being deemed in default (even when paid on time every month) because the borrower started renting the house out. Generally, owner-occupied mortgages are made with a lower interest rate than mortgages for rental properties. As a result, some banks (plus Fannie Mae, in some cases) don't want to keep a low cost mortgage on a rental property and will declare the mortgage in default when they find out about it.