Post # 1
We’re in good financial shape and looking at buying a condo or house but we won’t be living in it long, probably only about a year.
We would still like to purchase to build equity and while we’re not living in the area hire a professional property manager to take care of it and rent it out for the majority of DH’s military career.
Has anyone rented out their property through a 3rd party property manager? Any experiences good or bad?
Just wondering if anyone has done this, or considered it and has advice. Thanks!
Post # 3
@thursdayschild: We have a couple rental properties about an hour away from us (in university towns, so they are occupied by students) and have never needed to use a 3rd party. Any concerns or issues they have they call us directly, and we then will either a) go ourselves to check it out or b) call one of our service vendors in the area to go for us. (option B usually works best). We have contacts for electrical, plumbing and general construction etc to save us the time going, which has been great.
If you are renting out a condo you shouldn’t have too many maintenance related issues, and it’s more about paperwork, insurance and getting the $ 🙂 You may end up spending $ on a 3rd party needlessly, especialyl if you are able to line up people in the area that could help with any sort of problem, and you could bank that money yourself. Obviously, if you aren’t up for this task, hiring someone is the best solution, and i think as long as you trust them, they are organized etc you shouldn’t have any issues!
Best of luck! It’s a great investment.
Post # 4
@StaceyA: We would probably need a 3rd party manager. We could be living anywhere across the US (or, though unlikely, the world) at any given time. I can’t just pop into SoCal if we’re living in North Carolina or Hawaii. The joys of military life. DH has about another 15 years in the Navy until he retires.
Thanks for your input, I’m glad you’ve had a good experience! I’m really hoping we have a similar experience if we chose to do this!
I’m leaning towards condos for exactly the reasons you mentioned! They’re easier to take care of and a lot of major stuff is taken care of by the condo fees.
Post # 5
@thursdayschild: condo’s are great for that. You can incorporate the condo fee with their rent and that is usually the best way to cover your bases, espcially when you are potentially living far away. Having 3rd party would be great when tenants are moving out/moving in , take care of paperwork and any other small issues that you wouldn’t want to deal with. Like you said, if you are living far away things you wouldn’t easily be able to do. Home ownership while renting is tough… there is always issues with people not cutting grass in a timely manner, landscaping that needs to be done, and generally larger isses to deal with that a condo wouldn’t have.
All the best, it’s a great experience and nice to pocket some extra $ every month too. 🙂
Post # 6
Since this is an investment property since you wont be living there within a year or two there is a lot to consider regarding your finances.
Get a book or two and really do your numbers. How negative will your cashflow me? Is it really worth the equity? What about taxes? etc.
Post # 7
@thursdayschild: Both my hubby and I had places before we were married. I rented mine out because the housing market had turned to poo. I opted to use a property management company because we relocated to another state and the logistics of me being able to coordinate any repairs would have been challenging. It was rented for a couple of years and then I re-listed the townhouse for sale and ended up selling it at a loss, but it is nice to have one less mortgage to worry about right now.
I was happy with the property management company I chose. Just do some research on places before you commit to one. The one I went with took 10% of the monthly rent (which was higher than some, but this particular company had an established reputation, so given the distance I figured it was worth the additional 2%) and there was a flat fee up front, but I don’t remember what that was anymore. The management company took care of the screening of the applicants-I did get a final yes or no in the selection of the renter. If there were problems with the renter (ie:need of eviction) the management company would handle that as well and the company as a whole had a 1-2% eviction rate while handling hundreds of properties, so I think they avoided most problems by screening.
Post # 8
@thursdayschild: My hubby and I were thinking to do the same, but then I’ve learned from my Finance class that it is not a good idea to buy and rent it out for after a yr.
The Cons for this will be:There’s always potential legal or financial problems with tenants. You have to show the bank that you can pay for both(your own house and rented house). In case the tenant can’t pay for the rent on time then you have to pay for it. You’re letting strangers live in your house and usually there’s possible damages to property.
Renting will be a good idea if you know you’re going to live in the house for just one year. I have few friends that are married to millary and most of them are renting. When their husbands gets deploy they can easily move from one state to another.
Yes, it’s a good investment to buy your own property, but it is better if you and your husband decided to live in the house for 5 yrs or more. You also have to pay for the 3rd party property manager.
Post # 9
Hey! My father has been in the real estate business for 20 years so I’ve got some answers for you. First of all buying a home is ALWAYS a good decision if you are financially stable. Renting it out shouldn’t be an issue, we use Century 21 and they are very reasonable and our houses are never empty. If you buy a house you have a set extra income that will always be coming in, it’s wonderful to have an extra $1,000 coming in every single month. But I would really avoid the condo, depending on where it is it will be very hard to resell or even rent out. Houses are way easier to rent out than a Condo, I know this because we have a condo in an upscale part of ATL that will not sell for anything and we can’t rent it out because of the “association” that dictates everything you can do in your own condo and also charges $300 a month, hate condos. Renting your house is a great opportunity and a positive investment for the future, people always need a house to live in. My parents own houses in GA, FL, PR and I help manage them. I don’t think that you’re asking about a housing business exactly but it’s the same, houses are worth it always and renting it out shouldnt be an issue.
On another note there is a risky side to owning and renting out your home, for one thing your putting your house in the renters hands. Depending on if you use a company to rent it out or yourself you could have less or fewer problems. The houses we have rented out by Century we NEVER have problems with, the renters pay on time and never mess up the house. But we have had a few problems with people who we rent to. We’ve had people just not pay rent for 3 months, then we have to go through a long court process to get them evicted all the while they get to keep living for free. This happens quite a bit actually. We’ve also had a few people destroy the house. They feel it’s not really theres so they just don’t take care of it. But all of these have been because we’re in a hurry to rent the house, If you rent you have to check them out thourgly. Also another negative that does happen often but can’t be controlled is if something breaks you are completely responsible. You have to pay to get it fixed or fix it yourself.
Apart from all the things that could go wrong I think that purchasing a home and renting it out is a great investment.
Post # 10
@asilver615: I really appreciate your perspective. We’ll definitely take what you’re saying into consideration. We’re hesitating to wait because it’ll be 15 or so years until we can live in a place of our own choosing! Interest rates are SUPER low right now as well.
We wouldn’t be purchasing another house in a different location. We will be either renting or living in military housing. We could afford to carry a rent and mortgagr for a few months when there’s a gap in tennants, in addition to a “house” fund that will be strictly for upkeep of our owned property. We would just love to start paying off a house, so we’re not getting into our first mortgage at 40, does that make sense?
I hope my response didn’t come across dismissive, because I appreciate what you’ve got to say and we WILL think about it.
@JessicaPop: Again, thank you so much for your input. I’m glad you’ve had some good experiences with 3rd party management. There will always be a few bad apples, but it sounds like if we’re careful we can better our chances of avoidng the rotten ones.
Thanks everone! Still open to more experience and advice!
Post # 11
Our first tennants are moving in this week, so my experience is limited, but here it goes…
1. The mortgage may require that you live there for a full year, if you can’t be certain of that due to hubby’s military career, that might be your answer right there.
2. I would recommend a property management company. Ours takes a $295 flat fee for marketing each time we have to get new tennants and 9% a month. They were recommended to us by neighbors who rent out houses in our area. It is because we are using a good company that we were able to find the right renters ASAP and had the right to refuse anyone (but had the credit check, rental history, and gut feeling of the property mangers to guide us).
3. For us within a mile of the city we are able to get a substancial return on the property each month, you could talk to a property manager before you buy and see what comparable condos in the area are rented for, if that amount doesn’t cover your mortgage + mangagement fee DON’T do it.
4. Get a Rental Dwelling insurance policy and an umbrella liability policy to be sure you are covered in case the tennants set the building on fire and you get sued.
Good luck and cross your fingers for us too!
Post # 12
@JessicaPop: “First of all buying a home is ALWAYS a good decision if you are financially stable.”
I’m pretty sure there are thousands of people in CA whose homes lost hundreds of thousands of dollars in value, but are financially stable, that would argue with you on that point. Your own stability doesn’t make it a no-brainer – there will always be other factors, such as boom and bust cycles of the market and the cost of long term renting vs buying – which in some big cities, takes a looooong time to favor buying over renting (see: NYC).
OP: Think long and hard about what would happen should there be a several month (or more) vacancy in your condo. Can you really afford to float both your home and your rental property if nobody is living there and paying rent? If not, it’s not a good choice. If you can, and you are willing to risk it, go for it!