Keep property and become a landlord, or sell

[White Cat]

Make sure you're looking at all the costs. I had basically the same choice to make about my mother's house, with very similar numbers... except that the city requires an annual rental inspection and registration, the property taxes would almost triple going from the current owner-occupied rate to the higher rate charged on non-primary residences, and the insurance on the property would go up (though only slightly) as well. So instead of the ~$800 I'd originally estimated I could clear based on the current upkeep expenses on the house, I'd be looking at closer to $500/mo in profit - nothing to sneeze at, of course, but a low enough number that it could easily be eaten up by repairs, legal costs, etc. That's not enough to be worth the risk/hassle, for me. The only way I'd have done it is if we wanted to hold on to the house for ourselves or one of the kids to call home in the semi-foreseeable future, but once we ruled that out, selling just made more sense.

Her $7200 per year is most likely $2000 to $3000 per year, if that. Less if there is a calamity.

 

[tvguy]

You're sorta trying to spin it all up in twists, there's no need to

If a place changed their law or ordinance due to the pandemic it's no longer a temporary change unless noted otherwise. That the pandemic spurned the change doesn't matter, it's just whatever the law is. I suggested the OP would want to check the tenant/landlord laws and ordinances of their area because as a landlord it is your responsibility to know what you can and cannot do and what your tenants can and cannot do. As a tenant is it your responsibility to know what you can and cannot do and what your landlord can and cannot do.

To give an example curbside liquor was temporarily allowed by my state's alcohol and tobacco department during the pandemic by temporary governor's orders. That change was made permanent. Although the pandemic was the catalyst it doesn't matter as that's the new law. If we were still under a temporary allowance for curbside liquor it would be customary for me to say that along those lines.

Except I think some of the changes that are now permanent never would have ever been considered if they hadn't been tried during the pandemic. The pandemic kind of forced new ways of thinking.

 

[Mackenzie Click-Mickelson]

Except I think some of the changes that are now permanent never would have ever been considered if they hadn't been tried during the pandemic. The pandemic kind of forced new ways of thinking.

Oh sure I don't disagree. When I said the OP would want to look up the laws and ordinances for their area that's exactly what I mean. It doesn't matter how a law came about. To a potential landlord it's only going to matter that it's a law they have to follow and one they need to know about as part of their duties.

That example I gave you with the curbside liquor was exactly brought about by the pandemic, but that's neither here nor there because it's now a permanent law after being initially a temporary one with a finite end date. To the police (because alcohol and a vehicle are involved) or to a business it's not really important that the law came about due to the pandemic, only that it is now permissible to order and pick alcohol curbside. Having a bottle of wine from Olive Garden or a 6 pack of beer from the liquor store brought to your car is no biggie now, that's what is going to matter to the business, consumer and the police.

 

[starry_solo]

SELL, SELL, SELL and never look back!

 

[tvguy]

Oh sure I don't disagree. When I said the OP would want to look up the laws and ordinances for their area that's exactly what I mean. It doesn't matter how a law came about. To a potential landlord it's only going to matter that it's a law they have to follow and one they need to know about as part of their duties.

That example I gave you with the curbside liquor was exactly brought about by the pandemic, but that's neither here nor there because it's now a permanent law after being initially a temporary one with a finite end date. To the police (because alcohol and a vehicle are involved) or to a business it's not really important that the law came about due to the pandemic, only that it is now permissible to order and pick alcohol curbside. Having a bottle of wine from Olive Garden or a 6 pack of beer from the liquor store brought to your car is no biggie now, that's what is going to matter to the business, consumer and the police.

They changed the law allowing to go sales of cocktails here in California in May as a result of how well it worked for businesses during the pandemic. The also removed the requirement that the customer also buy food.
The other pandemic change with restaurants that they are working to continue is allowing restaurants that added outdoor seating during the pandemic be allowed to continue to offer it. That is more difficult because in some cases they expanded into parking spots, sidewalks and streets and put up tents. Cities want to reopen streets now and take back the parking, and they find themselves having a hard time on one hand wanting to keep outdoor dining on sidewalks at the same time they are trying to clear the homeless off the sidewalks because they are a hazard. And some restaurants won't be able to afford to keep outdoor dining because the Fire Marshall is not longer going to exempt tents from the fire code. They outdoor seating will have to have a permanent structure with fire sprinklers.

 

[Mackenzie Click-Mickelson]

They changed the law allowing to go sales of cocktails here in California in May as a result of how well it worked for businesses during the pandemic. The also removed the requirement that the customer also buy food.
The other pandemic change with restaurants that they are working to continue is allowing restaurants that added outdoor seating during the pandemic be allowed to continue to offer it. That is more difficult because in some cases they expanded into parking spots, sidewalks and streets and put up tents. Cities want to reopen streets now and take back the parking, and they find themselves having a hard time on one hand wanting to keep outdoor dining on sidewalks at the same time they are trying to clear the homeless off the sidewalks because they are a hazard. And some restaurants won't be able to afford to keep outdoor dining because the Fire Marshall is not longer going to exempt tents from the fire code. They outdoor seating will have to have a permanent structure with fire sprinklers.

Yeah we had an old law that was down to just a few counties, mine included, that required 30% of a business's receipts to come from food in order to sell alcohol. That law was already on it's way out here before the pandemic but the curbside liquor and other realities of the pandemic made it less "sinful" if you will so that particular rule went to a vote in my county and we voted overwhelmingly to repeal the requirement of 30%. Before the rule change places would hire food trucks and other such things just to satisfy the rule, it was dumb but my state had prohibition long before the rest of the country and some of that stuff stuck around long after. We still have some room for improvement..still can't buy hard liquor or wine at the grocery store, gotta go to the liquor store or cross state lines (which people often do) although we can purchase since the summer before the pandemic more than 3.2% ABV beer at the grocery store...so progress has happened elsewhere lol.

The parklet (that's what the call it here) also stuck around but was more of a city by city rule to begin with and wasn't necessarily permanent per se as not all cities kept it up. Some kept it but added this or that to the rules.

That's interesting about fire sprinklers outside. I can't say that's been at least advertised as an issue here when the news has covered the parklets.

 

[Cannot_Wait_4Disney]

Answer me this. Would you take 100k and invest in this property mortgaging the rest just to have to rent it out 13 years 10 months and 20 days (give or take a day) to get your investment back? That is essentially what you are doing if you keep the place. And that's not counting if someone trashes the place or down time between renters. For me the answer is no. I would sell given the parameters given. If those change then my decision may or may not be different.

 

[TippyThomas]

I personally wouldn't risk it. I'd sell.

 

[tvguy]

Yeah we had an old law that was down to just a few counties, mine included, that required 30% of a business's receipts to come from food in order to sell alcohol. That law was already on it's way out here before the pandemic but the curbside liquor and other realities of the pandemic made it less "sinful" if you will so that particular rule went to a vote in my county and we voted overwhelmingly to repeal the requirement of 30%. Before the rule change places would hire food trucks and other such things just to satisfy the rule, it was dumb but my state had prohibition long before the rest of the country and some of that stuff stuck around long after. We still have some room for improvement..still can't buy hard liquor or wine at the grocery store, gotta go to the liquor store or cross state lines (which people often do) although we can purchase since the summer before the pandemic more than 3.2% ABV beer at the grocery store...so progress has happened elsewhere lol.

The parklet (that's what the call it here) also stuck around but was more of a city by city rule to begin with and wasn't necessarily permanent per se as not all cities kept it up. Some kept it but added this or that to the rules.

That's interesting about fire sprinklers outside. I can't say that's been at least advertised as an issue here when the news has covered the parklets.

They didn't track how much liquor a restaurant sold, the old law just required a customer to also buy food if they wanted to buy alcohol to go. That requirement is gone.

Yes, they call them parklets here too.

Not an expert on the fire code but I have noticed that permanent structures over outdoor dining before the pandemic had fire sprinklers. Makes sense since they operate propane or electric heaters in those areas in the winter, so there is a fire risk with those. The fire risk with those tents they put up on the temporary parklets would be even more flammable.

 

[we"reofftoneverland]

Sell

 

[Hillbeans]

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.

My HOA has a 2-year rental clause, so if I do decide to go the rental route, they would have to sign an addendum drafted by the HOA agreeing to those terms. And yes, I just read the master deed and as unit owner I would be responsible for the behaviors of my tenants.

 

[Hillbeans]

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?

I just read the by-laws and yes I would be responsible. They do make the tenant sign a 2-year rental addendum.

 

[Mackenzie Click-Mickelson]

My HOA has a 2-year rental clause, so if I do decide to go the rental route, they would have to sign an addendum drafted by the HOA agreeing to those terms. And yes, I just read the master deed and as unit owner I would be responsible for the behaviors of my tenants.

Wow 2 years? I think the people complaining in my neighborhood is just wanting 12 month lease requirement which seems normal to me. I'm a bit surprised it's only 6 months right now given the developer of our neighborhood.

In our case we requested an 18 month lease (which was one but not all of the reasons the landlords went with us vs one other person interested) because we knew we would be wanting to build our our house and lo and behold the closing date for our house was 1 week after the 18month lease ended. We were able to arrange to pay the landlords for that additional week. 2 years would have been a bit much for us but given today's timeframe of building homes probably would have been better now. Our home took 7months to build, it's taking much longer now.

 

[Hillbeans]

Answer me this. Would you take 100k and invest in this property mortgaging the rest just to have to rent it out 13 years 10 months and 20 days (give or take a day) to get your investment back? That is essentially what you are doing if you keep the place. And that's not counting if someone trashes the place or down time between renters. For me the answer is no. I would sell given the parameters given. If those change then my decision may or may not be different.

View attachment 709827

Well I definitely see your point, but it's my assumption that if the housing market stays relatively hot and I sell in 5 more years, I would make more than just $100K. I paid $211K for my condo in 2016 and they are now selling for upwards of $325K

 

[Hillbeans]

Wow 2 years? I think the people complaining in my neighborhood is just wanting 12 month lease requirement which seems normal to me. I'm a bit surprised it's only 6 months right now given the developer of our neighborhood.

In our case we requested an 18 month lease (which was one but not all of the reasons the landlords went with us vs one other person interested) because we knew we would be wanting to build our our house and lo and behold the closing date for our house was 1 week after the 18month lease ended. We were able to arrange to pay the landlords for that additional week. 2 years would have been a bit much for us but given today's timeframe of building homes probably would have been better now. Our home took 7months to build, it's taking much longer now.

I agree - I think a 2 year rental is a big commitment, but I am not in a resort town so most people who are my neighbors have been here before me (and I have lived here 6 years)

 

[TwoMisfits]

Well I definitely see your point, but it's my assumption that if the housing market stays relatively hot and I sell in 5 more years, I would make more than just $100K. I paid $211K for my condo in 2016 and they are now selling for upwards of $325K

Housing market will be the reverse of hot for the next few years if mortgage rates and taxes continue to climb. Houses appreciated while rates were low and savings returns were about nil. That's reversed...for now.

Unless you think NJ will be a very hot market for businesses which are growing to move into...I don't see that, either.

About the only NJ property I would hold for rent is the true beachfront properties...

 

[Darcy03231]

I'd sell. We have neighbors that decided to rent their home out when they decided to live full time at the lake. After the horror stories they've told there's no way I'd ever be a landlord. After the last tenants moved out they fixed the damage (again) and sold.

 

[Colleen27]

Well I definitely see your point, but it's my assumption that if the housing market stays relatively hot and I sell in 5 more years, I would make more than just $100K. I paid $211K for my condo in 2016 and they are now selling for upwards of $325K

That's a gamble. Not only are interest rates rising, we are rapidly approaching/have hit the early days of a demographic transition where the Boomers who own homes downsize, transition to senior living, or die. Between financial constraints, different preferences in terms of location/community amenities, and the changing geographic shape of the job market, there's real uncertainty about the degree to which younger generations will replace aging elders as homeowners. It is hard to keep that in mind when we're in the midst of a housing affordability/availability crisis, but you only have to look to other "greying" countries to see how quickly demands for rapid expansion can fizzle into regional or even national contraction when such a big demographic swing is taking place.

ETA: This too was part of my decision to sell. My mother's home is in a fairly desirable suburb, but I've watched as houses in the neighborhood have turned over and for the most part the sellers have been been older Boomers (and their elders, not sure what that generational name is) heading to Florida, moving to senior living, or dying, and the buyers are by and large younger Boomers and older Gen X who are themselves downsizing from the "McMansion" suburbs into the "cute brick ranch" suburbs. No young couples, no young professionals, no young families. And reflecting that, voters in the community have shifted away from supporting parks & rec and schools while increasingly pushing for their local taxes to be steered into senior centers and activities for older adults. That, to me, doesn't bode well for the long-term desirability of the neighborhood; whether it is the total lack of public transit or nightlife, the strict city codes, or the current prices of homes, it isn't attracting younger buyers and betting on the value continuing to rise on the buying habits of the 55+ contingent just doesn't seem like a good wager. Either prices will have to drop to attract younger buyers or they'll drop for the lack of them, because nothing happening right now suggests that wages will increase or indebtedness decrease enough for those younger buyers to catch up with the current market.

 

[Cheburashka]

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 rented my house out for a few years, and wish I'd been more selective about who to rent it out to. He was a neighbor acquaintance, and my boyfriend at the time (who was also friendly with him) encouraged me to rent to him. That was a mistake. He kept my house a mess, brought a girlfriend to live there who I think was basically a prostitute (she worked at a massage place he frequented), and he was a contractor, so he had a lot of gear and some of it was left on the lawn and killed a large patch of grass. After he moved out he left the house trashed (despite prior promises of having it thoroughly cleaned) and neither I nor my then boyfriend ever spoke to him again. I also could never really have lived there again, with the knowledge of how yucky they had kept it for years, and knowing that he and his prostitute had used my bedroom...Just too yucky. So be very careful who you rent to if there is sentimental value or if you think you might ever want to live there again. People just don't treat rental property with the same respect as their own home. My renter was someone I'd been acquainted with for a few years and I'd seen his prior home, which was well-kept, and he seemed the responsible type who would never trash or damage my home. I was wrong. He also damaged multiple pieces of antique furniture, and actually tried to just get rid of one of them, hoping I wouldn't notice. Smh.

That said, my biggest regret is selling when I did, just shortly before the recent housing boom, so that while I profited, I didn't profit nearly as much as I would have if I had held onto it for two more years.

Housing is getting so expensive now. If you have kids and think any of them might ever need help with housing, I would keep the property so it might possibly be available for them in the future. That's from my perspective as a person who lives in an area with rapidly increasing popularity and cost of living.

 

[barkley]

Well I definitely see your point, but it's my assumption that if the housing market stays relatively hot and I sell in 5 more years, I would make more than just $100K. I paid $211K for my condo in 2016 and they are now selling for upwards of $325K

we live in what's been one of the hottest markets in the nation and traditionally one of the most stable. we are seeing significant price drops with forecasts of minimum continuing 5% decreases each year for the next couple of years. it's always a gamble with real estate. we sold a home in 2006 at the top of a hot market-when that market cooled it took until this recent real estate frenzy for buyers during the time period we sold to so much as break even (out of curiosity i just looked at my former home on zillow-it's current value is only $11K higher than it sold for back then which is over $25K less than what the real estate commissions would be to sell it ). i would really run the numbers-what the upkeep, association fees and such would cost to hold on to it, taxes for income property if you rent it out...even if the market remains strong in your area it could end up being a wash (and that's not even figuring in your time and energy as a landlord).

And yes, I just read the master deed and as unit owner I would be responsible for the behaviors of my tenants

lord-that's not being a landlord, that's being a parent!