Current Events > Any landlords on CE? Specifically for a single property

(+) Yeah! (+)

I'm just toying with the idea.

Fiancee and I have an accepted offer on a larger house contingent on an inspection.

I was just going to put the current house up on the market, but there is a market for small house rentals especially considering this house is like a 10 minute bike ride to the university which is a pretty large university (about 10k students)

Not sure if the hassle, such as taxes, maintenance or paying a property manager, etc would be worth it, but it's just a consideration for now. Still paying a mortgage on it too.

I highly recommend renting out your old place, especially if it has a low interest rate, assuming you can get enough in monthly rent to cover your mortgage payment.

I use a property manager and it is super easy, they take care of everything from finding the tenants, collecting rent, organizing all the maintenance. I just get a monthly statement and update from them. Taxes are also pretty easy, I just update a spreadsheet once a month with all the costs broken down into the categories on the tax form (can't remember which one it is), takes like 10 minutes a month.

So what I'm finding is that a property manager/company gets 12% of the rent on average. Let's say the toilet breaks, do they fix it then bill me 100% of the cost?

Quick math and it's probably not worth it.

Taking into account the rental estimate, 40% would go towards the mortgage, 12% to property management, and 24% towards taxes.

That doesn't leave much, especially if something needs repair and then I'm breaking even with the hassle.

I don't rent out an entire property, but I own a home and rent out the extra 2 rooms I'm not using to a couple and their kid.

My surface level research reveals that you're on the hook 100% on all maintenance and repairs.

So while I could net 3-4k a year doing this, that 3-4k might need to go towards said maintenance and repairs.

Will_VIII posted...

Quick math and it's probably not worth it.

Taking into account the rental estimate, 40% would go towards the mortgage, 12% to property management, and 24% towards taxes.

That doesn't leave much, especially if something needs repair and then I'm breaking even with the hassle.

That still leaves you 24% profit every month and each month that goes by you have less mortgage and the property is accruing value. Sure something can break but its not common. Ive been in my house 19 years and the only thing that has crapped out on me was a fridge and my 1991 furnace blower died 2 years ago. Most months are going to be fine. Youre essentially having someone else buy you that house but gamefaqs will hate you and call you evil for that.

archizzy posted...

gamefaqs will hate you and call you evil for that.

Yeah, they might but most college students aren't looking to buy a house that they're only going to live in for 2 years, in a city they may not live in after graduation.

Oh I didn't consider insurance... Unless that just remains rolled up into the mortgage

Will_VIII posted...

Quick math and it's probably not worth it.

Taking into account the rental estimate, 40% would go towards the mortgage, 12% to property management, and 24% towards taxes.

That doesn't leave much, especially if something needs repair and then I'm breaking even with the hassle.

Account for vacancies as well if there could be times where it takes some time to get new renters in.

As a homeowner, there really isn't that much maintenance costs on a month to month basis.

Maybe something needs replacing every 2-3 years that would be considered a significant cost to repair/replace, like a furnace or major appliance, but for the most part you'll go months without dipping into any money you have put aside for maintenance needs.

So that 24% "profit" will be legit profit more times than not.

BUT... I would keep about 10 grand aside in an "oh shit" account, just incase something like a pipe burst or the furnace craps out.

I wouldn't rent to college kids.

If you rent your college kids... look into some strict as possible lease laws for your area because they will fuck up that house

emblem-man posted...

Account for vacancies as well if there could be times where it takes some time to get new renters in.

Also having to account for lack of rent and eviction...

Kinda tough decision here

Will_VIII posted...

So what I'm finding is that a property manager/company gets 12% of the rent on average. Let's say the toilet breaks, do they fix it then bill me 100% of the cost?

The property management collects its fee for managing and all other costs are borne by the owner.

Hospy posted...

The property management collects its fee for managing and all other costs are borne by the owner.

So they could potentially do it "in house" at an exorbitant rate

Will_VIII posted...

So what I'm finding is that a property manager/company gets 12% of the rent on average. Let's say the toilet breaks, do they fix it then bill me 100% of the cost?

It has been a few years since I was shopping around for management companies, but back then the higher end was 9% (probably dependent on area too though). You are on the hook for repair costs too, so like a typical maintenance thing for me is:
Tenant calls the management company saying the toilet is broken. Company goes out to assess the issue, they determine its say $300 to fix. If it was the tenant's fault, the tenant gets charged for the repair, if it is just wear and tear then the $300 is taken out of the monthly payment I would get from the management company.

If it is a big issue (anything over $200 in my case), the management company will get multiple bids from contractors and I have to approve of everything before any work is done and money is spent.

Maintenance issues aren't that bad typically, only a few random things a year.

Will_VIII posted...

Quick math and it's probably not worth it.

Taking into account the rental estimate, 40% would go towards the mortgage, 12% to property management, and 24% towards taxes.

That doesn't leave much, especially if something needs repair and then I'm breaking even with the hassle.

If your mortgage is only 40% of what you think you can rent it for, then you should definitely rent it out, that is a fantastic ratio. My ratios are higher than that and I clear an annual profit pretty easy. Property taxes and insurance should all be wrapped up into your mortgage.

The 24% you are saying for taxes, I am assuming you mean income tax you file at the end of the year? Good news is you only pay that tax on your profits, you don't pay it on the amount of rent you collect. So for example you collect $1000 in a month in rent, $120 goes to management company, $300 goes to mortgage interest, $200 goes to generic repairs, $100 goes to Escrow (prop tax/insurance), $100 goes to HOA. You made $180 profit, so you are only taxed on that $180, so $43.

Will_VIII posted...

So they could potentially do it "in house" at an exorbitant rate

Yes

My brother rents out a duplex that he used to live in and still pays a mortgage on. Technically hes positive cash flow but its not much, and regrets keeping it. But his best friend still lives there and couldnt afford actual rent so he keeps it to avoid kicking his friend out.

Hmm. I don't think there's enough margin to do this VS selling this house to significantly reduce the mortgage on the new one.

https://gamefaqs.gamespot.com/a/forum/d/d07d264b.jpg

Wat

Landlords are scum according to CE

Will_VIII posted...

Hmm. I don't think there's enough margin to do this VS selling this house to significantly reduce the mortgage on the new one.

If the mortgage is covered by only 40% of the rental cost, I find it hard to see how you don't cash flow well

I mean what my mortgage for the new house would be after selling the old house vs renting the old house

You might not make much today, but 10 years from now rents will be higher while your mortgage probably won't be.

It can be worth it TC, but it really depends on the location, what you price it, the neighborhood, how the house looks, and a few other details.

So the real mystery factor here will be your tenants and maintenance. You can get the tenants from hell and this cost you a fortune to rent to them. Or you can get great tenants who don't causeyou trouble.
Same with maintenance. Sometimes the tenants from hell can cause maintenance issues, sometimes you can just be unlucky of natural issues occurring costing you lots of money.

Overall, I wouldn't say it's a bad idea, what you definitely need to assess your situation thoroughly. Because some of the stuff I listed is more probable to happen in certain areas.

sfcalimari posted...

You might not make much today, but 10 years from now rents will be higher while your mortgage probably won't be.

Another thing to consider is in 10 years the house will be worth substantially more than it is today.

If you want to avoid a property manager. You would still need a handy man if you can't be one yourself. Tenants will always need help here. I rent out rooms to my friends but I also fix things myself. Living here makes it easy but that won't be your case.

Also, if you want college kids. Do the ones at graduate level and above. Higher chances to being honest.

AngelsNAirwav3s posted...

Another thing to consider is in 10 years the house will be worth substantially more than it is today.

Lol, hopefully not as my hope is we fix our housing issues and significantly reduce the appreciation of housing

I don't think (nor do I ethically agree) with blocking people based on their age.

But yeah after doing a little more math the best decision financially is to sell this house and put it towards the new one to bring that monthly payment down.

I'm surprised CE didn't come into this topic to trash TC

Probably because I'm not someone who would own dozens of properties in this scenario