Fourpaw

Hello all,

I don't post on here much, mostly just read what others have to say. I do have my own dellima now though so I figured it be a great time to post.

I had just bought my second home(in January),with all the equity from the first dumped into it, when I got a job offer in Houston. My family of four is now renting in a nice part of Houston but still struggling with what to do with the house.

It is a nice 3/2 with a two car garage in a established neighborhood within one of the best school districts around. It is officially completely renovated. I've had several realtors look at it to give me an idea of how much I can list it for but it just isn't even close to the money I put into it.

This now poses the age old question, rent it out or take a chance selling it. I had it appraised by several rental agencies indicating I could get approximately 1500+ per month rental income. The mortgage is 1000. Apparently, the housing market is a little slow at the moment but rentals are very hard to come by.

I have never done anything like this before so I am a little apprehensive. I am also 3.5 hours away now that I am in Houston. I have looked at management companies but it seems like they want first months rent and 10-12% of each remaining months rent...that seems pretty high.

Thoughts? I do want to buy another house in Houston at some point...I also do not want to get into this multiple house rental business. I wouldn't mind the one but I definitely don't want any more.

totaldigger

I pay a management company to take care of it for me. It costs first month's rent (which is a hard pill to swallow) and $80/month. And ya know what? I get a direct deposit into my checking account every month and my phone never rings. I don't get midnight calls saying the toilet is backed up. When my pipes froze last winter I found out about it two weeks later...after the problem was solved. They take care of everything; I just watch the balance on the house loan go down.

Sure, I could save a few buck by doing a long-distance management on my own, but I guarantee you I would have a lot of headaches. I hate giving up first month's rent, but if I had to prep the house and market it in search of a new renter I'm sure it would take me longer. One extra month the house sits empty means I negate any savings by doing it myself.

Just one opinion, but if the rent minus fees still pays the mortgage, taxes, and insurance, then why not have someone else build YOU equity in YOUR house? If you get sick of it in five years, hopefully the market will come back up and you can then sell it for what you put in it...plus have banked five more years of equity. Or keep it until it is paid off and have some nice retirement income.

Firsttimeflyer

I'll be in the same situation soon and as long as I can afford the new house without selling the current one, I will be renting it out. My friend, who is a pilot as well has several rental homes and does really well with them. It's all about the right contract and background checks on renters. It's easy to get someone in the house, but very difficult to kick them out if they don't pay.

It sounds like you are in a good spot to use a rental company. You break even after 3-4 months, after that you are making a few hundred bucks a month, or paying down that much more on principal.

PotatoChip

Another great time to post is when you have something to contribute. Helping others is what the site is all about. Good luck finding the information you seek, but remember, you can also help others instead of just asking for it.

E2CMaster

Unless you are local (under 30 minutes away) and have free time to chase people down for money, and have a spouse who can deal with things when you are on trips, use a property manager.

I pay mine 10% of the gross rent a month. ($125) but I have no large fees when tenants change. Maybe $50 worth of random stuff like rekeying.

I live 12 miles from one of my rental houses. I kept the property manager. I've never had it be empty more than a month between tenants (tenants rarely stay more than 18 months, most are military and get transferred). That, and being priced right saves lots of money.

On a cash flow basis, I lose $150/mo (Rent vs Mortgage) but that's mostly because my flood insurance went insane after Hurricane Sandy, even though I'm in Virginia and my house never flooded.

A good property manager is key. She's a friend of a friend, does her job well, and we have a fairly good setup as far as her calling in repairs vs me fixing things or calling out the home warranty.

GET BACKGROUND CHECKS AND CREDIT CHECKS ON ALL PEOPLE LIVING IN THE HOUSE.

Force all adults living there to be on the lease. I had an issue with a non lessee becoming a squatter at another rental house in Florida.

Both of rental houses are either slight money losers or break even on the cash flow, but when you factor in the mortgage getting paid down and the properties appreciating, it's the best investment I've had.

I'm upside down $50k in the FL house, even though I've owned it since 2003 and never cashed out, but the rental market is pretty strong there. I could easily get $3-400 more than the mortgage, but currently rent it to family at cost, in exchange for them doing minor repairs and landscaping out of pocket.

waflyboy

If you want to look at this purely from a financial point of view, I have an Excel model you can use.

PM me your email address if interested.

Fourpaw

PMed Thanks!