(Closed) We’re thinking of renting out our home – advice?

posted 6 years ago in Home
Post # 3
Member
11397 posts
Sugar Beekeeper
  • Wedding: December 2010

@Goldilocks1107: I have a friend who is staying in a hotel right now with her husband & almost 2 year old son, due to her husbands job. They have a beautiful home but are also thinking about renting it out so they can find a place to rent where his new job is. She is paying the hotel the same ammount of money (actually a little over) as what her mortgage costs. So its a no way out situation for her & is a must. I don’t know if the bank would consider a second mortgage or not. :/ Maybe some other bee’s will know?

I know my friend is making a contract & in hers she is including no hanging pictures on the walls, no pets & I assume other things.

Post # 4
Member
133 posts
Blushing bee
  • Wedding: November 2011

FI bought a home, and then we moved out of the state. He wasn’t able to sell it, so we looked into the renting option. The real estate agent that sold him the home found someone who was willing to rent it. When that person moved out, FI got another real estate agent who found another renter. I believe she asked for one month’s rent as her compensation. I would look into a realtor near you. She found the renters and set up the lease. We are still responsible for any maintenance issues and the checks come to us.

Post # 5
Member
7431 posts
Busy Beekeeper
  • Wedding: October 2009

Does the property management company also do the lease? If not, i woudl do one and put any stipulations in there, as Mrs Estep suggested. We are a few years out, but once we start building our second house, depending on the market, we may rent. I am also going to start traveling for my job possibly as early as next year, so we may do month to month renting while we are away. i am hoping that since we are not far from a military base, it would be marketable

Post # 6
Member
5756 posts
Bee Keeper

Would you still be living in the area to oversee any problems with renters or repairs needed, damages,etc Have you ever wanted to be a landlord? Many people have done it for many years, but some soon also tire of all the headaches renters can present. I’d be more worried about them trashing my house.

I suppose if you have enough income to be able to make the mortgages on two properties should one fail to rent long term, a bank may lend you the money, but in today’s market it sounds pretty high risk to me. I’m not sure I’d want to take that on unless I had a ton of disposable income. Lots for you to consider.

Post # 7
Member
6010 posts
Bee Keeper
  • Wedding: May 2009

We use a property rental company to rent out our first house (which happens be in Montana, so we couldn’t really manage it ourselves).  6% commission is not bad; we pay 10%.  I would do your own research on rent prices in your area, though.  You might find the management company is spot on, or you might find that they are a little low or high.  Anyway, it’s always good to look at comparables every year to make sure your rental prices are similar to the local market.

One thing you’ll want to ask the management company about is how utilities are handled.  At our place in Montana, if the renter defaults on utility payments the utility companies are legally allowed to come back against the property owners to pay those bills.  Similarly, where we live now, sewer, water, and garbage are not allowed to be placed in a renter’s name.  Even in a rental property, the property owner is responsible for those utility bills.  We’ve avoided this pitfall by including utilities in our monthly rent; we charge a little more for rent, and all of the bills stay in our names.

Next, if you decide to rent your property, I would really suggest opening a separate savings account with emergency funds in it, just for the rental property.  If something breaks, or if the house needs immediate repairs, the management company will usually take care of it, but you’ll get a bill afterward to cover the costs.  We found this out the hard way when our water heater exploded on our first tenant, and we had to quickly send a check for almost a grand to cover a new water heater and plumbing and the water damage.  Now, we have about $1500 that just sits in a savings account for this purpose.

Also, make sure you are very clear with the management company about what type of renters you want living in your house.  They should ask you to specify if you will accept pets or smokers, and if have any other preferences, let them know.  Ask how often they do home checks, too (ours do checks before a new renter checks in, after the renter ends the contract, and every 6 months for long-term renters) and verify that they require renters to show a proof of carpet/floor cleaning before the renter gets his/her safety deposit back.

Lastly, about buying a new house.  Once you can show a rental history in that house for one year, the banks will consider it an “investment” property, and you will be able to purchase a new house as easily as you did your first house (provided you have the money).  Before one year of rental history, the banks will treat any new home purchases as a “second home,” making it a lot more difficult to secure funding.

Post # 8
Member
7431 posts
Busy Beekeeper
  • Wedding: October 2009

Mrs Spring said everything I was going to say

Post # 10
Member
7431 posts
Busy Beekeeper
  • Wedding: October 2009

@Mrs. Spring: haha, that’s why I edited my post, because you said it way better. Smarty pants! 🙂

Post # 12
Member
7431 posts
Busy Beekeeper
  • Wedding: October 2009

@Goldilocks1107: I think that the fear of damage is why you have to be specific in the lease, and also make sure that you can drop by at least once a month or something so you can survey the house. Also take pics before you start renting, so that if need be, you have proof that the house was a specific way before it was rented

Post # 13
Member
7293 posts
Busy Beekeeper
  • Wedding: October 2011

We rent out our first house ( investment prop) but we are close by so we choose to manage it.

Mrs. Spring had great advice in points. Be prepared to pay for catastrophic house failures like AC, Heating, natural disasters ( def get insurance) and also put away for taxes ( ours are very high).

 

Post # 14
Member
6010 posts
Bee Keeper
  • Wedding: May 2009

Damage is probably going to happen; that’s one of the risks you take with owning a rental property.  However, your management company should be able to minimize damagae by carefully screening renters, doing regular house checks, and making any immediate repairs to damaged areas. 

The initial month’s cost is often called an enrollment fee.  It usually goes to an emergency fund for home repairs and start-up costs to get the house rented.  I’m not sure how much 30% is, but that might be pretty reasonable.

Another thing I forgot to mention is the headache of defaulting/non-paying renters.  We’ve dealt with this only once, and while our management company handled most of the issues (including taking the renters to court), we had to pay a couple months mortgage while they tried to find another renter for our condo.  Since then, they’ve been great about having another renter lined up before the current contract ends, but it was still a tight couple months for us while we paid almost an extra grand a month for a property no one was using.

Good luck on getting an offer!  Obviously, it’d be better/easier if you were able to seel it, so hopefully that happens for you!

Post # 15
Member
7587 posts
Bumble Beekeeper
  • Wedding: December 2010

@Goldilocks1107: Have you thought about doing a rent-to-own situation?  These type of renters usually have poor credit or not enough in the bank to buy, but want to. Usually you take a small portion of the rent and put it towards what their down payment would be when they purchase from you (for instance I did $200 of a $1000 rent) If they move they don’t get the money back, but if they purchase they get that money put towards the purchase of the home. These tenants tend to take better care of the property since they are viewing it as their home and not just a rental.

However, if you continue to go the route of the managing company 30% is very reasonable, most here charge the entire first months rent.

Post # 16
Member
2095 posts
Buzzing bee
  • Wedding: September 2011

@mwitter80: Why can’t you live closer to us? I would love rent to own, but it does not seem as popular in this area. I can’t outright buy since I still technically own a house with my ex.

From a renter’s POV… Make sure all appliances are up to date beforehand and that any minor repairs are taken care of prior to renting. Who will be in charge of house maintenance i.e. if the gutters need to be cleaned, if a tree needs to be limbed, those kind of things. We are responsible for all of these with our house but our situation is a bit unusual. We are fixing the house up for the owner. We have a rent to own situation where if we decide to buy any repairs we have made will come off the final total of the house (quite frankly we got screwed), if we don’t then we are out that money.

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