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My husband and I are very interested in renting out our house in about a year or so. We are planning to move out of state and would like to rent our house. This house will be paid off so this will be additional income. We will also utilize a property management company to handle any maintenance issues since we will be out of state.
So landlords- my question to you is: What is a good amount of money to have set aside for any unexpected and typical costs as a result of leasing and maintenance of renting the home? How much did your house insurance increase once you notified the insurance company it was a rental property?
Location: Chapel Hill, NC, formerly NoVA and Phila
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I think how much maintenance will be necessary depends on the age and condition of the home. We had our house rented for 13 months last year and spent $200 total for maintenance. Our homeowners insurance went down not up since we were no longer insuring contents of our home.
We are planning to move out of state and would like to rent our house.
Don't. Sell it. Take a loss if you must but sell and move on unencumbered.
In the event you really want to be a small time landlord...
find a suitable property near where you'll be living.
Do some deep reading and research before then.
On a rental, you figure you have three potential sources of expenses
1. Normal maintenance repairs. As michgc said, this mostly depends upon the age and condition of the house, but there will likely be more of these expenses with a tenant than when you lived there yourself. Expect to have an A/C or furnace repair every year, a plumbing repair at least once a year, an electrical repair once a year, etc. To pick an arbitrary number, I'd have $1000 for every $100k the house is worth in a fund at all times for normal stuff like this. Many months you will have nothing, but then the A/C goes out, and you have a $500 repair.
2. Turnover expenses. You will need to change out the carpet and repaint every couple of tenants, or if a tenant stays a long time, then after the tenant moves out each time. If tenants stay 12 months each, you'll likely have to recarpet/repaint every 3 or 4 tenants, with minor touchup in between. There are usually a few other maintenance items that are owner costs rather than tenant costs at this time, too, so I'd say another $3000 per $100k the house is worth for this.
3. "Bad Tenant" bills. These are bills that are in excess of a tenant's deposit that you are unable to collect from the tenant for whatever reason (tenant files bankruptcy, tenant has no garnishable job, etc). We've had expenses as high as $15,000 from a tenant who got a puppy. So this is the hardest one to put a number on, but you screen your tenants the best you can and hope you never get a really bad one.
These numbers on 1 and 2 are arbitrary. I may not agree with my own numbers tomorrow, let alone what someone else might think. Just some things to think about.
My husband and I are very interested in renting out our house in about a year or so. We are planning to move out of state and would like to rent our house. This house will be paid off so this will be additional income. We will also utilize a property management company to handle any maintenance issues since we will be out of state.
So landlords- my question to you is: What is a good amount of money to have set aside for any unexpected and typical costs as a result of leasing and maintenance of renting the home? How much did your house insurance increase once you notified the insurance company it was a rental property?
Thanks !
You are in a great position. I can't wait until my house is paid off. I am an out of state landlord and my insurance went up by $650.00. I do not have a property manager. The amount that you will need in reserve will depend on the condition of your home. I have a few thousand dollars and a business credit card. You are so lucky that you do not have to deal with keeping a reserve for the mortgage. Do you plan to buy another property as your primary residence?
The average operating-expense ratio of a residential rental property is 45% plus or minus about 2%. That is, the operating expenses—taxes, management, utilities, insurance, etc.—will consume about 45% of the gross income. That percentage applies all over the U.S. for all types of residential property including those where the owner pays all utilities and those where the tenant pays all utilities. For confirmation, see the annual income-expenses analyses put out by the
Home | irem.org
National Apartment Association | America's Leading Advocate for Quality Rental Housing
Don't. Sell it. Take a loss if you must but sell and move on unencumbered.
In the event you really want to be a small time landlord...
find a suitable property near where you'll be living.
Do some deep reading and research before then.
Yes, evaluate why you'd keep this far property versus near. Especially if you want it for just income, multifamliy can be better than a single family.
My insurance went down as a rental since they are only covering the structure not contents.
Consider getting umbrella insurance , look into home warranty, rear about landlord plumbing issues with tenants.
Once you leave your house, don't expect it to ever be as nice as you left it.
Depending in where you live utility companies can lien your property.
You lived in your house for a while you should know the up keep cost,also consider the cost of any DIY work you do.
I always budget 4 months' rent income per year to cover all expenses including maintenance, taxes, insurance, repairs per mortgage-free property. it pretty much works out that way, too. I don't use a property manager.
You are in a great position. I can't wait until my house is paid off. I am an out of state landlord and my insurance went up by $650.00. I do not have a property manager. The amount that you will need in reserve will depend on the condition of your home. I have a few thousand dollars and a business credit card. You are so lucky that you do not have to deal with keeping a reserve for the mortgage. Do you plan to buy another property as your primary residence?
We will probably rent an apartment or a townhome to make sure the move is a good fit for us. If all does work out we will end up selling the property about 1-2 years after we move.
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