Question about renting our home out.

[lucigo]

I have a question to anyone who has rented their home. How much above your house payment does it cost to have a rental company to manage the house for you? Any other expenses I need to consider?

My husband is working 450 miles away and our home is only worth what we owe on it so we can't afford closing costs and realtor fees to sell it, so we are thinking our only option is to see if we can rent it out.

Any advice would be appreciated!

 

[goodeats]

Well, obviously you need to budget for months where you don't have a tenant, or that the tenant is late/not paying rent. I would want to have 3months rent/mortgage in savings as an extra insurance policy. I would research the tenant/landlord laws in your state and county. What does it take to evict someone? In our area it is very pro tenant, so it's something to consider. Also, you still need to pay for any labor/supplies that the management company fronts for maintenance or repairs. Other costs that could go up are home insurance costs (your policy may be null by renting it out). Also, make sure your HOA allows it.

For tax purposes you can deduct quite a lot off the rental income (including depreciation), but if your AGI is over $100K you are limited to what you can take each year. The amount is phased out completely at $150K. The limit no matter your income is $25K, but I would hope your loss would not be that high on a SFH.

 

[rparmfamily]

We rent our home (well, it's been unrented for 4 months ARG!!!!) thru a property manager and his cut is 11%, only when the home is rented.

As for the question about the house payment,etc be prepared, depending on your mortgage payment, to lose money each month. You have to rent your house for a fair market price which may or may not be near your mortgage. For us, we rent $100 over because that's what the market allows.

 

[Robinrs]

Unfortunately you have to base your rent based on the market, not on your mortgage. No one will rent a property that is overpriced for the market and attracting a renter is your first objective.

Renters will be making comparisons just like buyers.

 

[a1tinkfans]

Good Luck OP!!!

 

[lucigo]

Well, obviously you need to budget for months where you don't have a tenant, or that the tenant is late/not paying rent. I would want to have 3months rent/mortgage in savings as an extra insurance policy. I would research the tenant/landlord laws in your state and county. What does it take to evict someone? In our area it is very pro tenant, so it's something to consider. Also, you still need to pay for any labor/supplies that the management company fronts for maintenance or repairs. Other costs that could go up are home insurance costs (your policy may be null by renting it out). Also, make sure your HOA allows it.



For tax purposes you can deduct quite a lot off the rental income (including depreciation), but if your AGI is over $100K you are limited to what you can take each year. The amount is phased out completely at $150K. The limit no matter your income is $25K, but I would hope your loss would not be that high on a SFH.

Right now I'm just working on paying off as much of our debt as possible while making a house payment and rent for DH. We are really stuck and hoping for a solution. There is no way even under the best circumstances we could afford rent down there and a the house payment up here for a long period of time. We can't live apart for ever. The whole thing just sucks. I will have to check out the laws and insurance costs. We already pay way too much for insurance just because we are in Florida. No HOA thank goodness. Thanks for the tip about taxes, DH is a teacher so the dollar limit isn't a problem

We rent our home (well, it's been unrented for 4 months ARG!!!!) thru a property manager and his cut is 11%, only when the home is rented.

As for the question about the house payment,etc be prepared, depending on your mortgage payment, to lose money each month. You have to rent your house for a fair market price which may or may not be near your mortgage. For us, we rent $100 over because that's what the market allows.

I've only looked at comparables on craigslist, and they are listed around what we will need, however that doesn't tell me if they are actually renting for that amount or if they are just sitting there not getting rented. I'm a little worried about getting the "right" renters as we have an acre yard that has to be mowed, and a pool.

Unfortunately you have to base your rent based on the market, not on your mortgage. No one will rent a property that is overpriced for the market and attracting a renter is your first objective.

Renters will be making comparisons just like buyers.

I think the rent will be at least close to the house payment, if we are lucky a little more, but I'm more worried about getting someone who will pay the rent than I am about having the entire mortgage covered.

Good Luck OP!!!

Thanks, we are going to need it. We are moving to Orlando I should be happy right?? Ug!

 

[jedijill]

I'm in a similar situation. I sat on my house for a year paying both the mortgage and my rent in my new location while I was trying to sell. I lucked into my current tenants as my realtor found them. I'm anticipating them moving out in the next couple of months and have been trying to figure out what I'm going to do next.

The market still stinks so I think I will try to rent again. I found a local property managment company and called and basically interviewed them. They charge 10% of the monthly rent with a $100 min plus a one time 50% leasing fee. They will help me advertise, will do all background/credit checks, property inspections, minor maintenance calls (up to $250..anything over and they would call me), rent collection, and collection/eviction (for an additional fee) if needed.

I felt really comfortable talking to these folks. The lady there gave me ideas of reasonable rent for the area and luckily it is in line with my mortgage. There are many expenses that you can deduct for rental houses including the property managment fees. I used Turbo Tax Premier this year as it included rental property and I got a lot of money back that I didn't realize I would.

Make sure you call your Homeowner's insurance and let them know that the house is a rental property. I have insurance through USAA and the "fire policy" was twice as much as my normal homeowner's insurance so make sure you count that into the cost. Absolutely get a deposit (I took one month's rent as a security deposit).

I've been lucky and had excellent tenants that pay early and don't call for much. However, I know this next go around I may not be as lucky which is why I will use the property management company to help mitigate potential losses.

HTH


Jill in CO

 

[rparmfamily]

I'm in a similar situation. I sat on my house for a year paying both the mortgage and my rent in my new location while I was trying to sell. I lucked into my current tenants as my realtor found them. I'm anticipating them moving out in the next couple of months and have been trying to figure out what I'm going to do next.

The market still stinks so I think I will try to rent again. I found a local property managment company and called and basically interviewed them. They charge 10% of the monthly rent with a $100 min plus a one time 50% leasing fee. They will help me advertise, will do all background/credit checks, property inspections, minor maintenance calls (up to $250..anything over and they would call me), rent collection, and collection/eviction (for an additional fee) if needed.

I felt really comfortable talking to these folks. The lady there gave me ideas of reasonable rent for the area and luckily it is in line with my mortgage. There are many expenses that you can deduct for rental houses including the property managment fees. I used Turbo Tax Premier this year as it included rental property and I got a lot of money back that I didn't realize I would.

Make sure you call your Homeowner's insurance and let them know that the house is a rental property. I have insurance through USAA and the "fire policy" was twice as much as my normal homeowner's insurance so make sure you count that into the cost. Absolutely get a deposit (I took one month's rent as a security deposit).

I've been lucky and had excellent tenants that pay early and don't call for much. However, I know this next go around I may not be as lucky which is why I will use the property management company to help mitigate potential losses.

HTH


Jill in CO

I also have USAA in FL, was a homeowners, now a fire policy. It's not cheap. PLUS on my renters ins in the townhome I'm in now (in HI) I carry extra liability for my home in FL.

We had good tenents for nearly 3 yrs...then they got a pit bull, which is against my HOA and we didn't approve so my property manager sent them a letter asking if it was true they got this dog. (my neighbors emailed me, all furious because the dog was breaking thru their fences) The tenents got ticked off and moved out. The only good thing was they didn't destroy the home or anything and I got to keep the deposit, which I've used to clean the home, paint and do a few repairs.

I'm also trying to rent my home, it's outside Jax, near NAS JAX. We've gone now for a longtime (and thru Christmas) no renters, paying basically 2 mortgages and I NEED that house rented soon!!

 

[Cheshire Figment]

If you go to a professional management firm normally there is a 50% to 100% of the monthly rent as fee for the first month, which covers advertising, vetting the client, preparing the lease, etc. After the first month, the fee tends to be about 8% of the rent.

Normally the rentor pays the rent to the management company, they pay (and deduct) any operating expenses and their fee, and thransfer the balance to your bank account.

You are responsible for making the mortgage payments (including escrows).

Also, you should notify your insurance company that it is being rented out. This may drop several of the coverages suchgas for personal property and temporary living expenses. The rentor may carry their owen rentors insurance.

Also, if you are in a state with a Homestead Exemption, you should notify your Tax Assessor that it is no longer your principal residence.

 

[rparmfamily]

If you go to a professional management firm normally there is a 50% to 100% of the monthly rent as fee for the first month, which covers advertising, vetting the client, preparing the lease, etc. After the first month, the fee tends to be about 8% of the rent.

Normally the rentor pays the rent to the management company, they pay (and deduct) any operating expenses and their fee, and thransfer the balance to your bank account.

You are responsible for making the mortgage payments (including escrows).

Also, you should notify your insurance company that it is being rented out. This may drop several of the coverages suchgas for personal property and temporary living expenses. The rentor may carry their owen rentors insurance.

Also, if you are in a state with a Homestead Exemption, you should notify your Tax Assessor that it is no longer your principal residence.

Yes, because in FL you will lose your homestead exemption unless you are military on orders out of state.

Mine works as described above, renter pays my property manager, who takes his cut (11% where we are but no fees upfront or for advertising,etc), deducts any bills he pays (my lawn service bill goes to him) and then deposits the rest. If there is a repair under $250 he has it done and then deposits the difference and mails me the paperwork about the repair.

 

[Piglet4Ever]

Great thread. I am getting some good ideas. DH and I are planning on renting out our house when we move this Aug. We already decided to use a Property Managment Co. Luckily for us we live fairly close to the Navy Base my DH works on so we should hopefully have a pretty easy time renting it out.

 

[lovesmurfs]

Another point to consider is that a renter may not treat your home like his/her home -- "just a rental." Be ready, if you sell in the future, to have to replace carpeting, fix holes and scuffs, etc. We rented a house when DH were first married, and while we told the leasing agent that we had a dog, apparently the homeowner didn't want pets. Our dog managed to scratch a bedroom door (when company was over) and we had left a number of pretty bad spots on the carpet which the steam cleaner we rented made worse (we were young and immature renters....).

However, we got the full deposit back -- leasing agent called it normal "wear and tear." Apparently (according to a neighbor) the owner was really ticked off at us, but more at the rental agent.

 

[goodeats]

I'm a little worried about getting the "right" renters as we have an acre yard that has to be mowed, and a pool.

Around here if you rent a home it's customary that gardening and pool maintenance would be included. At least I would expect a *major* reduction in rent if they were not.

Make sure your lease spells out what is expected of your tenant in way of house maintenance. Your management company should be able to let you know what's common in your area.

 

[Lucky4me]

If you can sell it for what you owe and will only be out the closing costs, I'd sell it. It sounds like you'll be out much more in the long run if you rent it.
Maybe you could try by owner, the costs will be less, or something like America's best where you pay a set fee, show the home yourself and closing costs are included in the fee. Both would be the cheaper way to go.

 

[disneymom2one]

We rented our home out (in NW Florida actually) for awhile as we purchased our current home. I wouldn't do it again.

I also happen to live next to a rental property. I can tell you that although they're pretty good tenants, they do zero lawn work. They also have two dogs. I'm relatively sure the elderly owner doesn't know about the second.

 

[disny_luvr]

Good luck, OP. DH and I almost did this when our house wasn't selling. Thankfully, we did sell our house so we didn't have to worry about it, but I know it can be stressful.

 

[lucigo]

Around here if you rent a home it's customary that gardening and pool maintenance would be included. At least I would expect a *major* reduction in rent if they were not.

Make sure your lease spells out what is expected of your tenant in way of house maintenance. Your management company should be able to let you know what's common in your area.

It is an above ground pool and I would rip it down before I would pay someone else to maintain it, even though its brand new. I wish we could take it with us but apparently the entire Orlando area has HOAs and tiny yards and they don't "do" above ground.

We can't afford any of this. We can't afford for him to not have a job and live here. We can't afford his rent and our house payment. We can't afford to have a $10K loan and no house (paying closing costs out of pocket). We can't afford to pay the high rent down there and still have a couple hundred out of pocket on the house here.

I don't want to move. (stomping my feet) Really not sure what to do.

 

[lucigo]

If you can sell it for what you owe and will only be out the closing costs, I'd sell it. It sounds like you'll be out much more in the long run if you rent it.
Maybe you could try by owner, the costs will be less, or something like America's best where you pay a set fee, show the home yourself and closing costs are included in the fee. Both would be the cheaper way to go.

According to the realtor (and I need to talk to another one) there are 3x more houses on the market than normal. I will probably try by owner, it can't hurt, but it still has to appraise for enough to meet the mortgage.

 

[jedijill]

It is an above ground pool and I would rip it down before I would pay someone else to maintain it, even though its brand new. I wish we could take it with us but apparently the entire Orlando area has HOAs and tiny yards and they don't "do" above ground.

We can't afford any of this. We can't afford for him to not have a job and live here. We can't afford his rent and our house payment. We can't afford to have a $10K loan and no house (paying closing costs out of pocket). We can't afford to pay the high rent down there and still have a couple hundred out of pocket on the house here.

I don't want to move. (stomping my feet) Really not sure what to do.

It sucks being in this position. Luckily its just me in my case. I saw the writing on the wall so I looked for and found another position before I got laid off but the dang house just wouldn't sell. Wish I would have known the floor would have dropped out a year before. I should have sold in 2007 but hindsight is 20/20. Good luck to what ever you decide to do.

Jill in CO

 

[lucigo]

It sucks being in this position. Luckily its just me in my case. I saw the writing on the wall so I looked for and found another position before I got laid off but the dang house just wouldn't sell. Wish I would have known the floor would have dropped out a year before. I should have sold in 2007 but hindsight is 20/20. Good luck to what ever you decide to do.

Jill in CO

Thanks I think I will talk to another realtor, and maybe get an appraisal just to see where we officially stand. It might even be better to rent just in case the job doesn't work out down there. Teachers get cut all the time so who knows how permanent his job is.