questions for those who rent out a second home

[minnieandmickeymouse]

First can you tell me the good, bad, and the ugly???? Is this some we really should look into doing?? HOOOOW do we do it?

We have been in our first home for about 9 years, we owe about 39,000 on the home, and it's worth about 170,000. We NEED more space!!! It's about a 1,300 SQ. ft of living space, 3 bed 1 bath, garage, 4 acres of land. There are 6 of us in it, 4 kids and me and DH, plus I am a dog breeder, and it's getting crowed with all us, plus dogs and puppies!!

I keep thinking we should rent this house out! Our morgage is only about 500. a month. And that includes the property tax, and home insurance. We are currently planning on ADDing onto the this home. But would it be better to rent it out, and buy some land and build our own home?

 

[lindakmonty]

I have rental property and I really like it. I started out by buying a duplex. I lived on one side and lived on the other. The renter paid all but $100 of the mortgage. Talk about cheap living ! I would rent it out in a heartbeat! The main thing is to have a good lease and do a credit check before you let someone in. It is great come tax time as well! Now, I've moved to the bigger house and rent both sides... it totally pays for itself plus some. I do not take care of the lawn/snow plowing or anything. I leave that up to them to take care of.... It can be very easy income, if you have good renters. A lot of times, you can get a good family there and they'll stay for years!

 

[annegal]

Depends on your area.
Maybe adding a Master Suite and den would be your solution...you've got the land!

 

[minnieandmickeymouse]

anyone else out there have some advice?

 

[barkley]

i would just think you would have to carefully write into the rental contract how you want the acerage maintained and for what purposes the renter could utitlize the acerage (can they operate a bsns-if so what type would it be limited to and would it require a secondary contract with you to ensure that your liability is limited for all purposes).

i don't think anyone should rent a property unless they know that in the event of no tenants (or the long eviction process no rent but tenants in place) they can cover both mortgages.

seems like you have plenty of land to build and addition on to, so it may be much more cost effective to do it that way. and, if you have a portion built (office or kennel or the like) that is dedicated space to your bsns. i would imagine that portion could result in a tax right-off.

i would check and see what it would cost to have your ideal remodel done and then compare it with what purchasing a comparable existing property runs. and keep in mind that if you do buy elsewhere and rent the other out-it's not advisable to think "oh well, if it does'nt work out we could always just sell it"-the tax implications for selling a second home are much greater.

 

[Rella Bella]

We own several rentals and it looks like you are in a good situation to rent it out, provided you do a bit of "due dilligence" to be sure your costs will be covered.

First check out what a 3 bedroom home rents for in your area. Then call your insurance agent and ask what it will cost for "landlord insurance", you will also need to be able to set aside some every month for future up keep.

How much you need for that will depend on the condition of your property now. Will it need a roof in 2 years or 10? When will it need painting? That kind of thing. You will want the rent to cover all this and your mortgage, so you know you are gaining both monthly cash flow and a long term investment.

To find a tenant you can use a service, it may cost a bit but it takes away some major headaches because they check their credit and rental history for you... you can do this yourself, but there is some reasurance using a company when you haven't done it before. They can also help you find a lease that will cover the acreage and any other concerns.

As for the vacancy thing, you have quite a lot of equity in the home. Since you will collect a deposit when you rent your home, you would have at least one months rent "ahead" to cover the mortgage if neccessary. If you run into a problem with an eviction (unlikely if you do you homework before you rent to someone) you could easily get a Home Equity Line of Credit from your bank to cover your expenses temporarily, or just do a partial refi to pick up some cash.

The great thing about owning real estate is it rarely depreciates... it usually goes up in value, so the longer you own it the better. Our plan is to buy one every year... once we have enough net rent (after expenses) to live on, we'll retire and then we can always sell one if we have unexpected expenses.