Keep property and become a landlord, or sell

[Hillbeans]

I am curious to get an opinion, and perhaps the good and the ugly about becoming a landlord. I currently own a 2B2BA condo in a very nice town in NJ. My DH and I will be consolidating to one household after my youngest graduates from HS in 2023. There are definitely positives and negatives with deciding whether to just outright sell my property and not keep roots in a town i've lived in for almost 20 years, or keep the property and become a landlord.

These are the pros and cons I can think of off the bat:

Pro to sell - Make a good profit (over $100K after paying off mortgage), not have to worry about renters and dealing with those issues (though I have a very strict HOA which should help if there is an issue), things breaking, fixing major repairs like my old HVAC, etc.

Cons - Rents are high so each month I could profit $600 after expenses, could sell property later on (5+ years) for a better profit, keep a fallback place for my children to stay in if ever needed, i'm attached to the condo (sentimental value).

Thanks in advance for any push in either direction!

 

[DisneyOma]

Does the $600 a month help you out? My mom is renting out her house for a nice profit, and it really helps her. It's in a trust for me, so that I can retire there. It's our family home (I'm the 3rd generation) so it has sentimental value as well. If the rent is as financially helpful as the lump sum of a sale, I'd just go with the rent, as long as the property is close enough for easy maintenance. My mom's place is about an hour away, so we can get there if needed, plus we have our small boat moored right there. If it was further away, it would be a pain to deal with it.

 

[fla4fun]

Although I realize most tenants are good people, with my luck I would get the ones that would literally tear the place apart, refuse to pay rent, and have to go through the long process of eviction. I would sell, take the profit, and not look back.

 

[White Cat]

Being that you have a mortgage on it and can walk away with $100000 I would sell. Several investment products out there that earn good interest.

 

[Disneylover99]

I say sell! The hassle of being a landlord would not be worth it to me.

 

[Mackenzie Click-Mickelson]

(though I have a very strict HOA which should help if there is an issue)

I'm not sure how your HOA covenants are written but in the rental house we lived in before this house that was also in an HOA (a more lax one though) and our current house in an HOA if you rent out your house the homeowner is ultimately responsible for any tenants. Having a strict HOA does nothing to help you on the tenant front if you're ultimately responsible for ensuring the tenants abide by the rules. Check with your covenants on how they are written for when you rent out your house. The HOA is between you and the HOA not the tenants and the HOA unless it's written otherwise.

In our home you cannot rent the house out for less than 6 months lease (and there's push to make it longer), the yard still has to be cut and weed free (as reasonable as possible), no separate structures allowed (so a tenant couldn't just add a tool shed for instance), any nuisance the tenant causes could lead to warnings and fines for the homeowner, etc. There is such a property that people are complaining about because the tenants aren't caring for it, the neighbors are upset for the condition of the backyard and the appearance and that house is why people are pushing for stricter rules.

I don't mention this to deter you from renting out your property but it would be really important for you to ensure you understand your responsibilities with your HOA should you do so, just so you're aware.

 

[RoseGold]

$600 seems nice until the AC is 3K to repair, you have to call the plumber again, and the carpet is really trashed now. And don't forget the flipside to the HOA when they fine you for the party that went after 11PM or for the trash cans staying out an extra day again. And then the tenant can't pay again. And don't forget the taxes. All of this has to be reported correctly. If you don't already have a CPA doing your taxes, you're going to need one.

I might consider this if you are handy, live nearby, and have some flexibility in your schedule to handle things. Or, if this is a longer term place, like a beach condo you want to retire to or something. In my life right now, I have zero space for this, and it would be a burden, 100%.

If this is the kind of place you could Airbnb, like a beach condo or something, I might consider that more, but with professional management.

And tenants rights. If the heat is out, you are responsible for housing them in a hotel in a lot of places. States and even cities can have A LOT of rules on landlords. I'd be reading some landlord horror stories from your city before I considered this. Some places have loopholes that exploitative tenants can drive a truck through.

 

[momz]

I used to be a landlord. It was not a lifestyle for me. Your experience is entirely dependent on the tenant. Get a good one and you'll be fine. The problem is finding the good one. I went through three. Here is my experience.

Tenant #1: fantastic (at first). Keep the property well maintained, had good communication. But, at 10 months into the lease, he just stopped paying his rent. I called, he didn't answer. I went to the house to ask for the rent, he didn't have it. After getting 2 months behind, I took him to court and had him evicted.
Tenant #2: stayed for 2 months. Decided to move in with his girlfriend. Stopped paying, didn't tell me any of this. I went to the property and found it vacant. I was able to hunt him down and got him to pay me the break lease fee, then had to find a new tenant.
Tenant #3: Signed a lease for 18 months. Had a great background check, was polite and clean when I met them.... They paid on time, so that was good. however, these people were completely inept. They had multiple complaints that were of their own making. They continuously clogged the toilet, every single toilet even was solved with a plunger. They complained of roaches (no previous tenants had roaches). When the moved out, I found mouse droppings everywhere and there were scrapes on the hardwood floors. It was costly to fix their damage.

We sold the home and now have peace from our tenants.

 

[Mackenzie Click-Mickelson]

My sister-in-law and her boyfriend are landlords of a 4plex but they do not have an HOA. They have background check requirements, credit check requirements and employment check requirements. But they are responsible landlords and live close enough. When we had a rental house our landlords were over 3 hours away and correspondence was via phone or text. When we had the furnace go out in the late fall/early winter they were responsive and were quick to call in a repair person and they paid for the repair (for the motor that had unfortunately just gotten out of warranty as luck would have it) over the phone. They were quite concerned since it was getting close to being very cold.

First thing I would probably do is look up tenant/landlord laws of your state as well as your city and/or county. Even as responsive as our landlords were there was an incident when we moved out. We took good care of their home, we purchased trim paint to fix things that weren't even from us but a prior tenant, we polished and cleaned their hardwood floor consistently, we corrected all the small nail holes from decor, we steam cleaned the carpets multiple times over the course of our 18 month lease and then ensured we did it when we leaving.

The wife (the main one we dealt with) came by to do the walk through on our moving out day, she walked through and wrote us a check for the entire security deposit. We also paid a non-refundable pet deposit for our cat. A few days after we moved out she says there's a spot on the carpet in one of the rooms that looks like it has matted down fur in it. We def. cleaned for them but it's possible that was there and couldn't get fully up. In any case she advised it was cat fur and wanted to see if we would chip in for new carpet. 1) if it's due to our pet then that's what the non-refundable pet deposit is for and legally she could have charged a lot more than she did (she charged $250 the state allows for up to 50% of the monthly rent which our rent was $1350 per month) 2) she released the full security deposit back to us which she legally had 30 days to do so. We politely declined any assistance and notated the non-refundable pet deposit. It was not our responsibility nor were we even sure it was from us (there had been previous stains elsewhere like in the master bedroom closet her mother confirmed when she showed us the home so the carpet was already showing wear and tear). Unfortunately that soured the experience that had been great the whole time.

 

[_19disnA]

I would sell. You don't make money being a landlord and at best you probably break even. Do you want to be 'on call' for any issues (real or imagined) the tenants are having? Do you have the time to become a landlord which is really like having a part-time job? Will the renters maintain the property (both inside and out) or will there be extra costs involved fixing things damaged/broken by their negligence? Renters in general don't tend to take care of a home as if it were their own so there will likely be more wear/tear on things inside the home. Know someone who owns a beach condo and while they have had good luck renting, it is far more of a hassle then it is worth and they will never make money from the rental income. Coordinating repairs can also be time consuming and is an added 'cost' since your time is worth something.

If the property is hundreds of miles away from where you currently live, do you want to spend the time/money driving back and forth when repairs are needed? Some cities allow for short-term rentals while others do not. Check what the local laws are particularly if your property is a vacation destination since some places don't want people constantly coming/going.

 

[sam_gordon]

I am curious to get an opinion, and perhaps the good and the ugly about becoming a landlord. I currently own a 2B2BA condo in a very nice town in NJ. My DH and I will be consolidating to one household after my youngest graduates from HS in 2023. There are definitely positives and negatives with deciding whether to just outright sell my property and not keep roots in a town i've lived in for almost 20 years, or keep the property and become a landlord.

These are the pros and cons I can think of off the bat:

Pro to sell - Make a good profit (over $100K after paying off mortgage), not have to worry about renters and dealing with those issues (though I have a very strict HOA which should help if there is an issue), things breaking, fixing major repairs like my old HVAC, etc.

Cons - Rents are high so each month I could profit $600 after expenses, could sell property later on (5+ years) for a better profit, keep a fallback place for my children to stay in if ever needed, i'm attached to the condo (sentimental value).

Thanks in advance for any push in either direction!

How would being in an HOA help in this situation? Wouldn't they come after the owner (you) if there is an issue?

Personally, I would sell. $600/month renting would take more than 13 years to match the $100K you get from selling. But that doesn't take into account major repairs and possible painting and carpet replacement after tenants leave. And that's assuming you would have a tenant every month. And rents may be high now, but what about 6 months or a year from now?

 

[kymom99]

I had a house that I moved from in 2011 after owning for 20 years. It wasn’t a good time to sell. I rented to a family member with a verbal (nothing binding) agreement that they were interested in buying when they were more financially stable. I only charged enough rent to cover the mortgage and taxes, since it was to be a short term deal. Five years later I told them I had no intention of continuing to be a landlord so either buy it or I’d put it up for sale. During that time I had to replace a hot water heater and an electrical cable from outside the house into the meter in the basement. I also paid for some pest control when they had a lot of ants one year. I had told them from the start I wasn’t painting or doing anything cosmetic.

They did buy it but I could have gotten more in the open market. Too bad I didn’t hold on another 5 years but I was tired of worrying about when the next big repair would come.

 

[SteveH]

You'll need to see what the market is like in a few years. Much of what I'm reading is talking about a sizeable market correction that could knock values down and with interest rates on the rise that is already having an impact. So if you're not going to do anything until spring you'll need to assess the market at that time. But if it were me, and the conditions were right I'd sell.

 

[mumto3girls]

I would sell. We own two commercial buildings with businesses as tenants and those are fine. The one building had an upstairs apartment with tenants (father and teenaged son). We inherited them when we purchased the building. We bought the building in July, in October the swat team busted in early on a Saturday morning as they suspected it was a hideout for some local criminals and they were running drugs out of the apartment. In December we had the eviction hearing, got the keys back and found an epic mess when we went back in. During the clean up of that I grabbed what looked like a wadded up paper towel off the floor with gloved hands and felt something sharp only to discover I had been jabbed with a used needle. The ER doctor put me on the drugs they use to treat HIV as a precaution and I needed a few immunizations I had either never had or needed to be updated on and I had blood work then and 6 months later testing for HIV and hepatitis.

There were also several repairs in those few months—mostly involving plumbing—plumber is the one who alerted the police about the drugs as he was finding them in the toilet drain—think teenaged son was flushing them when dad came home. Air conditioner also had issues. Someone broke a window one night.

Afterwards my husband wanted to clean it out and rent it again. I told him there was no way. Fortunately it was zoned as mixed use and our downstairs commercial tenant was interested. We would have made more renting it as an apartment, but not worth the stress IMO.

Sell.

 

[barkley]

I am curious to get an opinion, and perhaps the good and the ugly about becoming a landlord. I currently own a 2B2BA condo in a very nice town in NJ. My DH and I will be consolidating to one household after my youngest graduates from HS in 2023. There are definitely positives and negatives with deciding whether to just outright sell my property and not keep roots in a town i've lived in for almost 20 years, or keep the property and become a landlord.

These are the pros and cons I can think of off the bat:

Pro to sell - Make a good profit (over $100K after paying off mortgage), not have to worry about renters and dealing with those issues (though I have a very strict HOA which should help if there is an issue), things breaking, fixing major repairs like my old HVAC, etc.

Cons - Rents are high so each month I could profit $600 after expenses, could sell property later on (5+ years) for a better profit, keep a fallback place for my children to stay in if ever needed, i'm attached to the condo (sentimental value).

Thanks in advance for any push in either direction!

i would get some information on what it will cost you to retain the property as a rental before making a decision. find out what kind of insurance you need to carry b/c it could be more costly vs. traditional homeowners (i know around us that non owner occupied insurance can run higher in some cases), what the implications will be in the here/now tax wise (will you lose any owner occupied tax write offs/credits, what the implications of having rental income will do) as well as when you go to sell it (we've lived in places where it's a BIG state tax hit if you've not resided in the property for a certain number of years immediately prior to selling). i also would'nt count on the property going up in value-as others have mentioned there's a good possibility of a market correction in the next few years. we live in what's been one of the hottest real estate markets in the u.s. in recent years-we are now seeing prices significantly cool and projected decreases of about 5 percent per year for the next couple of years. if you could sell now and clear 100k with no significant tax implications i would be tempted to sell and be done with it.

 

[Imzadi]

Although I realize most tenants are good people, with my luck I would get the ones that would literally tear the place apart, refuse to pay rent, and have to go through the long process of eviction. I would sell, take the profit, and not look back.

This is exactly what is keeping me from renting out a house I am now trying to sell. Once it is learned that a renter is not paying rent, which may be about 3 months, here in NY state, it could take another 3 months to start the proceedings to evict the person. Then about another 6 months of procedures before a sheriff finally puts the eviction notice on the house and forcibly gets the deadbeat renters OUT.

In the meantime, the owner STILL has to pay the property taxes, insurance, etc., during all that time. Do you have those funds for approximately a year, with no house income coming in? And if you provide certain services like water, YOU will still need to continue to provide it. The law here is that you cannot simply turn it off, if you want them out, (until all the court proceedings are finished and the sheriff comes.) The tenant has certain protections from bad landlords unfairly trying to force them out.

 

[Mackenzie Click-Mickelson]

Once it is learned that a renter is not paying rent, which may be about 3 months

How would it take someone 3 months to figure out a tenant hasn't paid rent? That would be the landlord's responsibility to ensure rent is coming through.

I had an old coworker who had a heck of a time with tenants in Texas when she lived in Kansas but she readily admitted the bigger problem was she wasn't paying attention and that and only that delayed and complicated her attempts to evict the tenants.

While state laws (and even county ordinances) vary in timelines it shouldn't take you 3 months to figure out your tenants aren't paying.

 

[tvguy]

How would being in an HOA help in this situation? Wouldn't they come after the owner (you) if there is an issue?

That would be my concern. Then as the landlord you are dealing with a tenant and an HOA expecting YOU to solve the problems your tenant has created and then the HOA fining you if you don't act quickly enough.

 

[tvguy]

How would it take someone 3 months to figure out a tenant hasn't paid rent? That would be the landlord's responsibility to ensure rent is coming through.

I had an old coworker who had a heck of a time with tenants in Texas when she lived in Kansas but she readily admitted the bigger problem was she wasn't paying attention and that and only that delayed and complicated her attempts to evict the tenants.

While state laws (and even county ordinances) vary in timelines it shouldn't take you 3 months to figure out your tenants aren't paying.

Then you have what we just went through with the pandemic where in many places there were laws prohibiting landlords from evicting tenants who did not pay if the non-payment was related to covid.

 

[Pooh2]

We were landlords for about 6 years.
We would never do it again!