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We just purchased a new home 5 minutes away from our current home. I'm looking for advice on renting it for 1-2 years, then selling, or just selling it now. Then rental would cover the mortgage & taxes and we would probably have a small profit ($100-200) in addition, after paying mortgage & taxes. Renter would also be paying down $650 of my mortgage principal each month.
Selling seems like the most convienient, stress-free option but I think if we keep the home for a couple years there is a good chance we could sell for more money compared to selling now?
Where is the home located that you want to rent or sell? Being a landlord can be a pain, but it really depends on what you can sell that home for in today's market and if it will be enough to cover your mortgage on the property. There are pros and cons to both options. But please provide a little more detail on the property in question.
Id say you are right on with renting now, as the home market will rebound someday and you will be able to sell it at a nicer profit + it will be closer to being paid off by then.. Id vote rent it.
Where is the home located that you want to rent or sell? Being a landlord can be a pain, but it really depends on what you can sell that home for in today's market and if it will be enough to cover your mortgage on the property. There are pros and cons to both options. But please provide a little more detail on the property in question.
It's a 9 year old home in Swedesboro, South Jersey. Single family home in residential neighborhood, 4 BR, 2200 sqft.
Just make sure you can pay all your bills without the rent from your old house. As a landlord in NJ there are a lot of legal and liability things you need to take care of. And what if the tenents don't pay rent on time?
NJ property tax are high. $100-$200 month is not worth the risk. New house close to 10 years, don't be surprise maintenance will start to creep up on you. I would look hard at getting it sold. If the taxes are low and you only net $100-$200/month after mortgage, that's a different story.
As someone who does rental properties, I refuse to buy buy and rent houses in NJ..
I'd only rent if had the $$ to cover both mortgages should the tenant decide not to pay rent for an extended period of time.
I assume since you already bought the second property before selling the first that you can handle both mortgages. I've thought getting involved in rental properties but like the other poster said the numbers never seem to work out very well in New Jersey because of the ridiculously high property taxes.
Which town is the home located in? Swedesboro proper, Woolwich, East Greenwich or Logan? I think it makes a difference in terms of stability in the tax situation. Logan's taxes have been very stable for the past several years. The taxes in the other communities have been far more volatile primarily because you have three taxing entities; PK-6 school district, 7-12 regional district and the local town. Of all of them, Woolwich is the most volatile do to the growth there and the fact that they are sharing a larger and larger portion of the Kingsway costs and building bonds. Next year, your profit margin may not exist.
The area in general is very soft in terms of rentals compared to other areas. The vast majority of people buy. This is either indicative of latent demand not being met with supply or low demand. I think it is more of the latter, especially in single family homes. Most people moving to the area are doing it to permanently settle and raise a family, which means buy. The rate you would have to charge on that kind of house, is probably more than what people could buy for. Then you run into the issue of the expansion of more traditional rentals in the Weatherby PUD, where they are adding 3BR townhomes to the existing apartments. These are all higher end places with garages, private storage, etc. The rental rates are also pretty competitive. So, that would be your competition; do I rent from M2009 or do I rent from a traditional complex with all the stability and services that provides? I think most in a short-term rental situation will pick the complex, especially a new and shiny one.
As far as actually running the rental, my inlaws and I own a couple properties, so here are my thoughts on the business end. $100-$200 a month is a pretty slim margin for a property, especially if you do not have healthy reserves. Given the age, there will probably be some system repairs that need to happen in the next couple of years. Your monthly profit is barely going to cover those costs. These are things that would be fine during a sales inspection, but may cause an issue for a tenant. I would recommend you have at least a 6 month reserve (mortgage+taxes+insurance+10%) to cover any carrying costs and maintenance items. In a rental if the heater goes out, it's something YOU need to fix NOW, you don't have the luxury of waiting to line up finances like you would in your home.
You don't really want to be a landlord. You are only looking at this in the hopes of having a tenant cover your mortgage in the hope the value goes up over the next couple of years. That is a bad way to get into the business. Part time, situational landlords are the ones that have all the problems and get caught up in the legal end of things, because it's not something you really want to be doing. You have no guarantee of the property appreciating in value or at the very least going up enough to make all this hassle and potential maintenance costs worth it.
Overall, if this was my property, I would sell now. You don't want to be a landlord. You have no guarantee of appreciating value in the next couple of years. It's not an area known for having a robust rental market, especially in single family homes.
Sell! You could get a renter who would do $20K in damages and skip -- or worse! I'm a long-time landlord and have seen it all. On small properties the risk is smaller, but on larger homes like yours, look out! It's just not worth the risk on a nice, newer home.
NJGoat - I'm in the borough of Swedesboro. My neighbor and I share the same realtor and he was able to find my neighbor a corporate relocation renter at full asking price (just under $2000) within a couple weeks. I'm pretty confident I could get a renter relatively quick. I think I'm going to stick with my plan and list for sale first and see how that goes. I was hoping you would respond to my post! Always appreciate your info. Thanks again.
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