Registered: 1263773779 Posts: 38
Reply with quote #1
Hello everyone, especially OHLandlord (since I know you have lots of experiences):
My house is currently on the market and with the real estate being down it hasn't sold after 90 days. So we're considering to convert this into a rental property. The house is currently on a 15 years fixed mortgage with very low interest rate, but the monthly payment is quite high (as a result of 15 years mortgage). I probably would get enough rent to cover for the monthly mortgage, but not the property taxes and gardener fee. My question is, based on your experiences, would this be a good idea to to do. I was thinking about renting it for 5 years and when the market gets better, we will then sell it. By then we have only 10 more years on the mortgage. Rental market is currently really hot in my area, so it shouldn't be that hard for us to find tenants. If you can give me your perspectives/feedback, that would be really appreciated. Thank you so much!
Registered: 1323412494 Posts: 445
Reply with quote #2
This really depends on a number of things.
1st-- do you have the fortitude to be a landlord (or pay a management company to do it for you which adds an expense.)
Do you have the funds to support the property? You said you could rent it for the mortgage ( I assume you mean principle and interest) but not enough for taxes and gardening. What about insurance, repairs & maintenance, vacancy rate, and the management fee? If you do have the ability to support the property, it could be a reasonable thing to do, depending on a number of other factors. One is that you will have to make an educated guess as to what the property value will be in 5-10 years when you plan on selling. Will that allow a ROI that fits your goals? How much equity do you have in the property now-- you said you had a 15 year mortgage with 15 years left to pay-- did you just purchase it or refinance it. One of the things you get to do is to depreciate the value of the building (but not the land) while renting it. This further adds to the "loss" or expense column. If you are in a high enough tax bracket, the losses may lower your tax enough to make it worth while-- if your in this tax bracket you should have your account advise you on this.
I would NEVER purchase a property based on the information you gave to use as a rental. After we put up the down payment (equity), the rent has to cover PITI, maintenance, vacancy, and property management (and usually be cash flow positive) or we just are not interested. There are times that people purchase a home for their own use, and convert them to rentals because they can not sell them and have to support the property (negative cash flow)-- and it is still the best thing for them to do. If you have a good credit score and want to protect it, this could be a good choice. Part of the whole housing mess is due to the buyers purchasing more than they really can afford or need.
I believe that the market is at or very near the bottom right now, and that it will turn around. No, I do not think that it will roar back to where it was in 2 or 3 years--- but I believe it will start going up by 3 to 5% per year before long --depending on location, jobs, the world economy, etc. Some areas will not see any appreciation for years to come ( have read about areas where 40% of the homes are vacant), while some areas are going up now.
Registered: 1326522489 Posts: 1
Reply with quote #3
Well, Refinance Tennessee rates are often lower than home purchase mortgage rates, which means many home owners who haven’t refinanced in the past few years will likely be able to save money through this financial aid.
Registered: 1360058852 Posts: 5
Reply with quote #4
No doubt it’s a good idea of renting your property as you’ll be having something in your hand and at least you can slowly start fixing up the things. And if you have problem regarding maintenance or repair then you can certainly opt for quick loans to stop delay in your earnings and paying for your mortgage.
Registered: 1370321488 Posts: 6
Reply with quote #5
For me that is a good idea,doing it while waiting to the market to get fine is a very helpful solution.In Helsinki Finland many people use to do it also some are investing through rental properties and some are just having a debt for unsuccessful things they do.Me too i have a debt and i get it from getting loan at
http://www.pikalainax.fi/ but then i am almost done on paying it and actually thinking to invest in real estate soon.
Registered: 1379746645 Posts: 18
Reply with quote #6
Renting is good idea and also you said their is been good market for it in your area. So before you sold rent it on current price and make all dues then sell it on high price....
Registered: 1169270040 Posts: 3,753
Reply with quote #7
I'm sure this topic is long dead (or at least SF has settled this by now.) Mary did such a good job that I didn't need to answer it at the time. I'm currently doing a lot of these. Owners need to sell, but they can't. It may be that the market is still down in their area, they may be underwater on their mortgage (owe more than the home is worth), the home just isn't selling, or some other reason. They have to move on, but don't want to just give up (take a foreclosure, file BK, do a deed in lieu, etc.) Renting out the house (with a smart property manager) can save the day. Even if the rent doesn't pay for all the costs, it may pay for most of them. The above post demonstrates this. The rent would cover the mortgage payment, but not the taxes or gardener fee. (I'd advise him to skip the gardener, and make the tenant's responsible for lawn care.) But even then, the owner only has to pay for the taxes. That's better than paying the mortgage, taxes, heating costs in winter, and other upkeep. Renting it may allow him to keep the home until the market improves (or they pay down the balance) so they can sell it. That could save his credit and give him a way out. Owners who are in this situation should at least consider this as an option.
Registered: 1398506458 Posts: 28
Reply with quote #8
Came across the post now and am impressed with the idea shared by OHlandlord.
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