single family home - rent out or sell? (San Diego, Orange: renter, HOA)

[cleoneo]

We currently own a single family home near Mission Valley and are moving up north. We are debating if we should sell the home or rent it out until our future plans are more firm.
What's the rental market like? What are your experiences as landlords? I'm thinking a small family would be ideal renters.

Where do you think the housing market is going to go? I'm thinking if prices are going to go down, then maybe it's better to put the house on the market now.

[sschibuola]

We're in a similar, though reverse situation from you - moved to San Diego from Orange County two years ago, renting out our place in Orange County.

Need more info from you to really venture an opinion, e.g.

- how FAR is "up north" . . . will you still be in driving distance to check up on the place? Do you have friends or family who can keep an eye on it for you? If not, you may need to consider a property management firm which will add to your carrying costs. Either way consider getting a home warranty so if something goes wrong in the house, the tenant calls them, not you.

- are you able to carry the property financially while being able to buy a place up north? Or is your plan that you will rent up there until you decide it's time to sell, and you'll need the proceeds from your MV house to pay for the new place? This relates to your timing . . .i.e. if you think you might need to sell the house in next couple of years versus being able to keep it as an investment/income property in the longer-run

- have you looked at what rentals are going for in your neighborhood (easy enough to do on Zillow or similar sites) - then calculated if the market rent will cover all your costs including mortgage, taxes, insurance (both landlord insurance and a home warranty for your tenant)

I'm sure EarlyRetirement will soon chime in - but I will still a little of his thunder and say - anyone who ventures an opinion on where this market is going in the short-term is delusional . . . need to factor in YOUR long-term plans

[shmoov_groovzsd]

Yeah well my crystal ball says....

If you can afford to keep it, why not? Are you breaking even renting it out or coming out ahead with management fees etc?

I would call a professional, local management company to get their opinion. They would know what you can get for your specific area and house.
Try someone like these guys San Diego Property Management

[cleoneo]

sschibuola that's funny because we are moving from SD to OC, opposite of you. To give you more info -
We will be driving distance but not that close, at least 1.5 hr drive. We have some family/friend in town to "keep an eye" but dont want to bother them either. Maybe it would be better to have a property manager or if we manage it on our own, can we call the home warranty ourselves for the tenants?

yes, if we can find renters to cover the mortgage, we can buy a home up north separately. the 2 properties wont be tied together.

I think we can get enough rent to cover mortgage, tax. Not sure if we'd make a big profit, but we'd break even and get to keep our house.

i think ideally, a condo is easier to rent out and less maintenance.
how has your experience been with renters for your OC house? it sounds like a great idea to keep it as an investment property, but have heard really good stories and horror stores of renters.

[Bakeneko]

We, like the OP, never intended to be landlords but it's worked out ok for us. Property has been a rental about three years. We're now considering making our current home in SD the rental and moving back into the rental home in Temecula....

We "make" about 100 bucks after mortgage, gardener and property mngr. My husband tends to grumble that we don't make enough for it to be worth it - but the way I look at it, we owed $260k when we began to rent it out, we now owe $240 and the house has gone up in value to about $350k. So in reality, we've made about 110K with very little effort.

I would never consider not using a (good) mngmt company. They have their own handyman that they send out for little stuff - ie installed a new microwave, and a theromstat. They bill us about $50 a call for him - we'd use that much in gas going up there plus time.

Honestly, part of the reason I insist on a mangment company is I do not really want to know my tenents or have them "know" me. A family member has already lost one rental property and might lose another because they keep renting to these hardluck cases who don't/can't pay their rent.

I would also recommend a conversation with our insurance agent if you have one. You need to have a million dollar umbrella at least, IMO. The good news is umbrella coverage is very cheap compared to the amount of coverage and peace of mind you get for the money...

[cleoneo]

Bakeneko, good advice.
Would you mind sharing the property management company that you use?

[sschibuola]

Originally Posted by cleoneo

sschibuola that's funny because we are moving from SD to OC, opposite of you. To give you more info -
We will be driving distance but not that close, at least 1.5 hr drive. We have some family/friend in town to "keep an eye" but dont want to bother them either. Maybe it would be better to have a property manager or if we manage it on our own, can we call the home warranty ourselves for the tenants?

yes, if we can find renters to cover the mortgage, we can buy a home up north separately. the 2 properties wont be tied together.

I think we can get enough rent to cover mortgage, tax. Not sure if we'd make a big profit, but we'd break even and get to keep our house.

i think ideally, a condo is easier to rent out and less maintenance.
how has your experience been with renters for your OC house? it sounds like a great idea to keep it as an investment property, but have heard really good stories and horror stores of renters.

Sounds like you are in a good position financially to consider keeping and renting it out. As Shmoov said, and I agree, in the long-run it's a good investment.

Knocking on wood here . . . but we're onto our third annual tenant and they've ALL been wonderful. Our rental place in OC is in a master-planned community called Talega, a reasonably upscale place similar to Carmel Valley. In this market, I think there are a lot of people who would normally be owners, but have been sidelined for various reasons by the economy. All 3 of our tenants were professionals with families, and former homeowners themselves; two had just gone through divorces and needed to sell their houses (which were more expensive than ours) and there weren't enough profits to make another purchase possible; one was a relocation from an even more depressed market where he unfortunately had no choice but to walk away from his house in exchange for better career prospects in OC . . . needed time to repair his credit. The first two had stellar credit. The 3rd obviously didn't, but he worked for a solid company in the same (small) industry I do so I was able to independently check his references with people I trusted.

So all 3 were former homeowners and treated the property like owners would.

We found in our situation we did not need to go the Property Management route . . . the Home Warranty was sufficient. There are no limitations on who can call . . .you can certainly call for the out-of-the-ordinary stuff. There is a $55 service fee per event- we just put it in the lease that the tenant is responsible to cover that cost if he calls - keeps the "little stuff" to a minimum . . .

We did use a broker to find and screen tenants, show the house etc. In addition to being a broker she has several rental properties herself and has developed a "nose" for good tenants. Well worth the 5% commission.

We find we seldom if ever need to physically be up there . . my wife or I will occasionally do a drive-by if we are headed to OC . . . and we've stayed friends with a couple of neighbors up there so they are our "eyes on the street" for anything weird . .. but honestly (knocking on wood again) we've had no problems with our tenants.

[cleoneo]

do you own a single family home in Talega?

we are also considering selling our single family home ,taking the proceeds and buying a condo as an investment property. Since condos have HOAs, it'd be less maintenance on us (no yard, old home issues)

[sschibuola]

Yes, it's a single-family home. Fairly new (2005) so no "old home" issues . . .yet . . .and a nice but appallingly small yard so no huge upkeep issue there . . .the rent includes a gardener coming out twice a month and that's plenty. Also, Talega is a masterplanned community so there's an HOA that takes care of the slope behind our house etc. . . .so overall as low-maintenance as you can get with a single-family house, so the decision to rent out was an easy one.

I can see a condo being more appealing from a maintenance perspective . . .but . . . and this is just my opinion, no real facts to back this up . . .with a condo your chances of getting someone with a "renter-only" mentality might be higher . . . NOT saying all or even a majority of renters are irresponsible or high-maintenance . . . I was a renter too, most people are at some point . . .but it just takes one bad tenant to ruin your whole outlook on being a landlord . . .

[cleoneo]

That's very true regarding your perspective on renters.
We have a single family home but it's old from the 1970s with a decent size yard so there is some maintenace. I think we'd end up paying for the water because our lawn needs to be watered and maybe a 1x month gardener. Do you pay for your tenant's water?

appreciate everyone's input!