10 year old House in Pflugerville - Rent it out or sell it? (Austin: sale, real estate)

[Joe0109]

I have a 10 year old, 3250 sq. ft house in Pflugerville. I am not sure if I should rent out my house or sell it. I am trying to move closer to Cedar Park from my existing house in Pflugerville. If I rent it then I can use the monry for my mortgage payment. Pflugerville now has the toll road and is growing rapidly.

I feel that if I sell the house a year later then I may get a better price. In the mean time I can rent it out. is that OK?

[Lol_Stacey]

Joe,

Renting your house is a great idea, and it is just the thing that many other potential home sellers are doing right now to wait out the LULL in home sales. You could always list it with an agent that may take it on as a Rent or Sell; basically this would be 2 separate listings.

Do keep in mind, if you "bought" the home with only a small down payment (less than 10% of purchase price), the monthly rent payment you receive most likely will not be enough to cover your mortgage, taxes, any mainteneance on the home, and having the home professional managed. Of course, if you think you are up for the task, you can manage the home yourself. Since you will be relatively nearby, it may not be that hard to manage, but if you have never been a landlord before, you may want to prepare yourself a bit.

Of course, that is a whole issue on to itself.

How long have you been "buying" the home? Are you the original (10 yrs) owner?

[Joe0109]

Yes, I am the original owner. I bought the home 10 years ago. How do I find out the appropriate rent amount for the house? Also how do I find a renter? Is it easy to find? It may sound strange but I do not feel comfortable going through realtor. How can realtor help me here? Lots of questions - I have.

[atxcio]

Originally Posted by Joe0109

Yes, I am the original owner. I bought the home 10 years ago. How do I find out the appropriate rent amount for the house? Also how do I find a renter? Is it easy to find? It may sound strange but I do not feel comfortable going through realtor. How can realtor help me here? Lots of questions - I have.

The realtor can help you with tenant screening (although you can do that yourself), and with good legal forms for your application, deposits, and lease itself. The forms they use cannot be used by non-realtors, so if you do-it-yourself you will have to find or create the proper legal forms... and make sure they are appropriate to Texas law. Hiring a realtor to find a tenant will usually run 1/2 to a whole month's rent, and that doesn't include property management.

That said, if you want to do it yourself, become a part of this group -- National Tenant Network. They can provide you with resources and services to be your own landlord. For finding a renter, I use the standard outdoor sign w/my phone # and Craigslist. Sometimes, I'll advertise in one of those "For Rent" magazines, or the Statesman.

[Lol_Stacey]

Originally Posted by Joe0109

Yes, I am the original owner. I bought the home 10 years ago. How do I find out the appropriate rent amount for the house? Also how do I find a renter? Is it easy to find? It may sound strange but I do not feel comfortable going through realtor. How can realtor help me here? Lots of questions - I have.

Hmmm, seeing as I have a Texas r.e. license (not currently active), I may have a somewhat biased, and educated opinion of your situation.

The "lots" of questions you have is exactly why you would use a realtor. I do understand why you would be reluctant to use one, since you would end up having to pay nominal fees for that information and assistance in properly marketing, showing, renting, collecting rent, communicating and solving maintenance issues to a person that could be a good property manager.

With that being said, the whole time I was in residential real estate, I refused to touch a rental because they are more trouble (to a realtor) than they are worth (very little income to a realtor unless you have a portfolio of properties).

You should read up on being landlord if you do not have experience in this and you choose to go it alone. As far as marketing the property, that is the other big thing that realtors do, just by your property being available on the mls, thousands more potential tenants will see your property, and many people would choose to rent from a professional company over an individual with the thought that it will be properly managed. I am not saying you can't properly manage your own home, but that might be the prejudice against your house. Also, realtors have access to property data that would tell of all the homes in your relevant area that recently rented and for how much.

You can do a search on realtor dot com or one of the other home sites that gets their info from the mls as well and find out what others are asking for rent in your neighborhood, it also shows (towards the bottom of the page) how long they have been trying to rent the home in the form of a listing data, for instance listed "June 22, 2009, 13 days ago". This info is good to look at, but doesn't guaranatee anything, since most times these are the homes that are not being rented (possibly because the rent is currently too high for the market). In addition, property managers have a list of potential tenants they work with and will give them first dibs on a new listing, so that new "hot" properties get snapped up before even going into the system so you won't know how much they rented for.

[Pfhtex]

If you are thinking of doing this, don't pay anyone else to do something you can learn on your own. What is your total payment on the house? Do you have a pool?

You know, using a management company will only eat into your money. If you can learn this process, you can replicate it!

There are resources available to you to run background checks on people. You will be able to use your judgment about credit-based screening. I personally never cared if people had poor credit outside of prior rent/house payments. You learn so much about potential tenants when you show the home. Show it in daylight. What are they driving? Pets? Screaming or quiet baby? Do they bicker? What do they do for a living?

Get verifiable references. The web will give you everything you need.

I think you should take the plunge. The Austin market has not taken a dive. School is coming up. Now is the hot season for home buyers, but people relocating from, say , CA, might rather rent for a year while they get to know the city.

Think about who will do the yard, etc. I think you will have fun. And you can now write off the entire payment and depreciation on the rental home!

[CptnRn]

Economists predict a housing shortage in 2010 so you if you keep it and rent it out for a year or two you can probably count on making more from the sale down the road. We kept our first house and have been renting it out for the last 7 years or so. There is some extra work and hassle to being a landlord, but its not all that bad if you properly screen your tenants before getting into a lease with them. One bad tenant can become a nightmare for you and turn the lease into a money loosing proposition.

You should spend some time reading the renting forums here //www.city-data.com/forum/renting/ to develop a feel for some of the problems that can occur and determine if you are up to dealing with them. Keep in mind that every state has slightly different landlord tenant laws so much of what you read here will not apply directly to what the law requires in Texas.

The Austin Tenant's Council website has some good resources Austin Tenants’ Council/Tenant-Landlord Brochures

But they also have a bias towards tenants rights. You should also read the Texas state statutes on rental laws to make sure you understand what is actually required of a landlord. Read Title 8 Landlord and Tenant of the Texas property Code Property Code (http://tlo2.tlc.state.tx.us/statutes/pr.toc.htm - broken link)

Take a serious look at what your costs will be to operate the rental as a business. i.e. payments, taxes, insurance, maintenance, repairs. Most of these can be written off as part of the expense of operating a business, there are also tax benefits for you such as depreciation.

One disadvantage, if you sell the home now and roll any profit over into the cost of a new home you don't have to pay capital gains taxes on the profit. If I remember correctly if you sell the home within 4 or 5 years of when you last lived in it in order to capture this benefit. I'd have to verify the time limit on this. I have heard some concern that there could be some tax law changes coming in the future that could make the capital gains tax more painful in the future. It would be worth talking over with an income tax accountant.

[Joe0109]

I do not have any mortgage payments on this home in Pflugerville. I would like to use the rental money for new house in Cedar Park. If I need to go with the realtor then roughly how much do I need to pay the realtor? Is this half of one month rent?

[TexasHorseLady]

Well, I am a real estate agent (just to get any potential bias ideas out front and center), but when we first rented out our house in town after moving out to the ranch, we used a property management company. They did take a cut (a substantial chunk of the first month's rent, and 8% per month thereafter), but given that we lived about 45 miles away and they took care of everything, for us, it was well worth it. For that, they found us tenants, they did all the checks on all of the applicants, we decided which one to lease to, and they took care of everything from that point on.

However, you can also use an agent simply to help you find a renter, and then do the management yourself. In that case, what you'd pay in a commission would be negotiable, but it would be, again, a substantial chunk of the first month's rent, because you'd be paying the agent a commission and your agent would be sharing that commission with the tenant's agent who would be handling the tenant's side of the process (much like when buying and selling the house, as a matter of fact). But after that, you'd get 100% and be responsible for taking care of such things from middle of the night plumbing emergency phone calls to collecting the rent and keeping track of what you spend on the place that qualifies as a business expense at tax time. Oh, and remember, when doing your figuring, once the home is a rental property and you're in your new home, you won't have the homestead exemption for property taxes on it - that will go to your new home - or the 10% cap on raising the appraisal like you do on your homestead. That's an easy one to get caught on. The income from the rental will be taxable income, too, so take your income tax rate into account. I'd recommend setting up a separate bank account for the house so it's easier to keep track of such things, and keep enough money in it to pay the taxes/insurance at the end of the year. (Your insurance on the house will be different, as well.)

As for the capital gains question, at the moment, you have to have lived in the house as your primary residence for two out of the last five years.

I know, it sounds like it's not worth it, but it really can be, especially with no mortgage payments. Success, whatever you decide to do!

[Joe0109]

What property management company do you recommend? I google a few property management company but I am not sure if they are the right ones.