Question about buying a new house, renting the old

[karen_in_nh_2012]

Thanks for the replies but again I am rather surprised at the negativity.

I would rent to students IF they met the financial requirements (not likely) and IF they agreed to rules like no parties, no music that can be heard outside the house, etc. Not many students would agree to those latter rules.

I would not provide utilities but would provide prospective tenants with my expenses the past few years so they would know what to expect.

My house is a ranch so all the windows are on the ground floor. I have smoke & CO detectors already for ME since I live here. Yes, the bank counts 75% of rental income (I guess it varies from area to area, but I've been given the 75% figure by more than one bank here). And I do understand the tax implications -- e.g. about depreciation etc. I would have an accountant run the numbers before 3 years were up to see if I should sell then (although I never wrote anything about selling in 3 years -- I was more thinking about holding on to the house indefinitely).

My bigger questions were about financing -- i.e. how the numbers were calculated (please see my last post above). Does anyone have any info on that?

And Mrtwigg, can you tell me more about your experiences when you decided to rent out your former house a few years ago?

Thanks again for the replies, I do appreciate them!

-Karen

[Mrtwigg]

Originally Posted by karen_in_nh_2012

And Mrtwigg, can you tell me more about your experiences when you decided to rent out your former house a few years ago?

DM inbound

[WyoNewk]

As a long-time (30+ years) landlord of apartments and single-family homes, I would strongly recommend that you sell it, even if you must take a loss.

You might get lucky and get great tenants. It happens. And you might get those who will trash your home well beyond what any damage deposit will cover. I've had to replace sub-floors to get cat urine out of a property, and that was on a lease in which pets were not allowed! I've had to replace all the closet doors, windows, new carpets and nice lawns. I've had to scrape human feces off of bathroom walls and replace toilets because they were so soiled they couldn't be cleaned. I've had to pay for 200 hours of cleaning and painting. And it gets worse.

My next door neighbor had a situation similar to yours. He spent a sizable amount remodeling his home, and when he had to move he decided, like you, that he'd be better off to rent it. It's a nice 4-bedroom home, nice neighborhood, great neighbors! When his last renters (who were there for less than a year) quit paying rent last summer he called me to ask if they were still there. Nope. They'd moved out of state. He asked me to take a look at it, as he was out of town. It was a disaster!

They'd left rooms full of broken furniture, clothing, misc. junk, food -- in cupboards and the refrigerator. (Power had been disconnected.) I'd never seen a real live roach before, but I learned what they looked like! Ugh! I personally put in about 100 hours of work on the home, then he and his wife worked on it full time for a couple weeks, and finally he hired a construction crew of four who worked on it full time for a couple more weeks. They had to replace much of the sheetrock, nearly all the wood trim including doors and the stairway, all the flooring, all kitchen and bathroom cabinets, refrigerator and dishwasher, all sinks and toilets. Of course it had to be completely repainted. I don't know what he spent, but I'm sure it was $20,000 - $30,000, and that doesn't include lawn damage. The last rent he got was for this past May. (The June check bounced.) He finally got new renters in on December 1. I told him he was foolish to rent it again, but he's just sure the new renters will be great. *eye roll*

This may not happen to you, but it can.

If you do rent it, the rent should be high enough to cover interest, insurance, maintenance, depreciation and still leave you an income for your investment, your time, and your risk. Renting it for your mortgage amount or less makes little sense.

[FrugalYankee]

Originally Posted by karen_in_nh_2012

Yes, I would screen tenants including a credit and references check, of course. I would actually try to get tenants from new professors at my college, who often rent for a year or two before they buy, just so they can get to know the area. (That's what I did my first year.)

Sorry about the negativity. Like I said, once you've been burned it really changes your view.

I think you might be in luck if you don't advertise your rental to the general public but instead tell department secretaries to get the word out to new KSC hires that there is a rental available.

Still you might be surprised in a bad way. I had tenants once, he was a foreman for a drywall contactor, really nice people, or so I thought. When they moved out I found out that there were domestic violence issues, the place was a wreck.

Ya never know....

[karen_in_nh_2012]

Thanks, everyone. You've given me a lot to think about.

And happy 2012!

-karen