Anyone Ever Rent Their Home Instead Of Selling?

Lounge By summernoelle Updated 9 Aug 2009 , 4:03am by summernoelle

summernoelle Posted 7 Aug 2009 , 11:23pm
post #1 of 17

Hi Everyone!

My husband and I may be relocating out of state, and are having a hard time deciding whether to sell or lease our home. The market is currently so crappy that we can't get out of our house with closing costs and realtor fees for more than we owe, so it would be $$$ out of pocket. The company will help us with it, but we aren't sure.

Has anyone ever rented their home out? From what I can see, there are some pros (equity, tax write off, having property to come back to if we don't stay out of state) and cons (damage to the home, dead beats, monthly costs for management company.)

If anyone has ever done this, I would really appreciate the input.

Thanks!!!!

Summer

16 replies
kakeladi Posted 8 Aug 2009 , 12:25am
post #2 of 17

O.k. I looked into this and once you rent or lease it becomes income property. If/when you want to sell you must live in it for something like 2-4 years OR re-invest in more income property OR pay capital gains.
There's lots more involved but that's the short of it.

BeeBoos-8599_ Posted 8 Aug 2009 , 1:50am
post #3 of 17

I am way to teritorial to let someone live in my house and most likely trash it. I think if you are moving out of state the best option is to sell it. Even if the market is bad. I am a huge Dave Ramsey fan and I cannot tell you how many callers he gets that moved and bought a home before selling the original house and then are stuck with 2 mortgage payments and no good leesees on the horizon. So whatever choice you make please don't buy a new place without first closing the sale on the original home.

Texas_Rose Posted 8 Aug 2009 , 1:57am
post #4 of 17

I've known people who rented out their houses and the tenants took everything...appliances, kitchen cabinets, toilets, even pried the ceramic tiles off the floors. Not that it happens to everyone, but just knowing there's that possiblilty is kind of scary. Also, you'd have to make sure you have enough cash on hand to make repairs if necessary...for example if the air conditioner went out that would be a major expense and yet the tenants couldn't be expected to live without it if it was summer.

indydebi Posted 8 Aug 2009 , 3:00am
post #5 of 17
Quote:
Originally Posted by BeeBoos-8599_

I am a huge Dave Ramsey fan ....


The man is a GOD!!!!!!!!!!!!!!!!! thumbs_up.gif

justducky Posted 8 Aug 2009 , 3:13am
post #6 of 17

Pros- Income while waiting for the market to recover.
Cons- Most states only allow one month's rent as a security deposit. Is that enough money to repair any damages?

Fees- The rent needs to be enough to cover your mortgage plus taxes, insurance and management fees. Who will pay for water/ sewer and trash pick up? Who maintains the landscaping?

Speaking of insurance.. you are now a landlord. Your property is now a business. You now must have a commercial insurance policy, plus a liability policy.

Mortgage- Your bank gave you a loan based on your inhabiting the property. The terms of your note have changed, are they ok with it now being a rental?

Can it work? Yes! But you must decide if the risks are worthwhile for you.

Hire a reputable management firm. Most of all remember, no one cares about your money as much as you do!

summernoelle Posted 8 Aug 2009 , 3:34am
post #7 of 17

Thanks for all the responses!

A couple of things I learned from the Realtor:

1. For Capital Gains-I think you only declare that if it exceeds your mortgage amount.
2. For the landscaping, trash/water services-you write into the lease that it is their responsibility.
3. For insurance-she told us you have the same company, but change it to insure it for renters, and it's usually the same amount.

Maybe it's different here in TX. We have some friends who rent and it's worked out great, but then again they live down the street from their rent house.

I think what scares me the most is them not making the rent, and then us possibly not making the mortgage payment. Scary!

Doug Posted 8 Aug 2009 , 3:35am
post #8 of 17
summernoelle Posted 8 Aug 2009 , 3:36am
post #9 of 17

Oh, also, for appliances and things, you can get something called American Home Shield which you pay a certain amount on and they come out and repair stuff. But for normal maintenance things, the leasing company will deal with it. (With a $100 minimum supposedly to keep people for calling in about burnt out lights, etc.)

Still scary though. Not sure which way to go.

summernoelle Posted 8 Aug 2009 , 3:38am
post #10 of 17

Doug-I'm not sure about that, because we would have to charge more in rent so we could still make the mortgage payments...

indydebi Posted 8 Aug 2009 , 1:43pm
post #11 of 17

I used to own 3 rental properties and worked in property insurance.

As stated above, landscaping/yardwork is written that it's tenants responsibility. I also made tenants responsible for "daily wear and tear", which means don't call me at one in the morning for a leaky faucet. Buy a dang washer and replace it! I will replace a faulty water heater .... I don't put a washer in a faucet.

The insurance you would get would be just building coverage. Your homeowners policy covers your contents but since you dont' live there, you have no contents to insure. Your only insurable interest is the building, so you get building coverage. Most of these also come with a liability coverage built in, but talk to your agent to make sure it's at the level you feel comfortable with.

Renters Insurance is what the tenants buy to cover their furniture.

There are two kinds of rent-to-own options, and I"m not sure exactly what the details are, so any realtors on board, please jump in on this one! Rent-to-Own or Lease to own is they are technically leasing right now but part of their rent applies toward their down payment. In however many years you two decdie, they will get financing and you will have already rec'd the down payment.

LEase with option to buy is a little more open. bascially they have the first option to buy the house. As I understand it, my tenant would lease my house and give me, let's say, $2000 to "buy" the option to be the first in line to buy the house. I'm real vague on this one, but there is a big difference in the legal paperwork and the buying price of the house. None of their rent is being applied to the purchase price of the house.

maryjsgirl Posted 8 Aug 2009 , 6:53pm
post #12 of 17

I still own the first home I bought. I rent it out to a family member for the amount of the mortgage payment so I do not receive income from it. They are responsible for everything. They've been living there for five years now and I've never had any issues.


I would definitely run credit checks on any potential renter.

-Tubbs Posted 8 Aug 2009 , 7:39pm
post #13 of 17

I worked for a while for a guy who rented out a bunch of properties. He told me that the single most imporant thing was to get the right tenants. He said he would see 50 applicants, and reduce the rent a bit if needed, if that was what was needed to get people in who would look after the place.

We have a vacation cottage and have renters in for the first time this week. I am very nervous about it, but we need the income... I think if you are going to rent a property, you need to detach a bit from it emotionally, and try to have it just be 'a house' rather than 'your home'.

ziggytarheel Posted 9 Aug 2009 , 12:00am
post #14 of 17

[quote="summernoelle"]Thanks for all the responses!

A couple of things I learned from the Realtor:


3. For insurance-she told us you have the same company, but change it to insure it for renters, and it's usually the same amount.

The commercial policy to cover a rental home is often more than a homeowner's policy for the same house/same company, even without your contents. It is all about the risk, and the risk is greater when you have tenants. But it isn't so much more that you can't account for it in the rent.

Also, PLEASE do not leave your home vacant and not change your insurance policy!! There is a very VERY short window where your home can be empty and you still have coverage under a homeowner's policy. A vacant home is a VERY high risk compared to an occupied home and normally, if you haven't changed your policy and someone breaks in or the hot water heater breaks or a pipe bursts or... whatever, you will have zero coverage. icon_sad.gif

I've known many people to be successful in renting out and others to have some problems (mostly with trying to evict). I think it is all about proper screening and a good management company.

adonisthegreek1 Posted 9 Aug 2009 , 3:27am
post #15 of 17

My dad rented a couple of duplexes. Nothing but trouble. My brother has several rental properties and he has a third party manage them and they are paid a commission. Very successful.

favrtdtr Posted 9 Aug 2009 , 3:41am
post #16 of 17
Quote:
Originally Posted by adonisthegreek1

My dad rented a couple of duplexes. Nothing but trouble. My brother has several rental properties and he has a third party manage them and they are paid a commission. Very successful.


Obviously this is a big decision, but speaking as a renter - I really resent the way it is just assumed that the place will be damaged and or trashed when I leave or while I'm living there. I have NEVER left a property damaged or trashed and many times have left it in better condition than when I moved in. I know that trashing and damage does happen but not by all renters. Yes, the risk is there - but that's what checking references and taking deposits are for. There are lots and lots of things to consider but to just throw out the option of renting because there MIGHT be damage is unfair and in this market - kinda crazy. Good luck with whatever you decide - I hope it all works out for you.

summernoelle Posted 9 Aug 2009 , 4:03am
post #17 of 17

Thanks for all the responses!

The Realtor we are going to use (either way) is a pretty tenacious woman and talked to us about credit and background checks. I trust her to help find us a good candidate-but there is still a risk involved.

favrtdr, unfortunately SOME people do not care for another's home as much as they would their own, and also there is a risk if they were to be evicted or something that they would purposefully do damage.

We also found a management company we are comfortable with. But for now, it's still deciding what the best option is. Selling is going to cost us SO much out of pocket that I think it might be nice to keep the house until the market turns.

So, the jury is still out on this one.

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