sell my house or rent it out

[phyllisindallas]

I'm not sure if this is the right forum for this question, so if not, please move me!

I have a house I own outright, which I plan to keep for now, and rent out in three years when I am able to become a nomad. I think this is the right plan for several reasons.

One, even though I feel like I am being realistic about my expectations, I am also someone who wants to have her eyes open, so just in case that doesn't work out, I still have a house, which is a pretty huge safety net.

Second, a house is a good investment. Houses generally go up in value (I can show you my steadily increasing property taxes to back that up!), while especially now, I would be lucky to get a safe 2% return on investments.

Third, if I sell my house and don't buy another, I get hit with a big tax bill. 

Fourth, and maybe my first three covers this, yes, I will have a large chunk of change when I sell, but that is a finite amount of money, which seems scary to me. The house goes up in value. Money only goes down.

(To clarify, this house has an estimated value of $160k. It is a nice well maintained 1600 sq ft house on a third of an acre only a few miles from the city center, but don't get me started on housing values in predominately non-white areas).

I could rent out my house for at least $1500 per month. I paid cash for this house years ago as a rental investment property (it was a foreclosure), and rented it out for years until my marriage ended, so I am living in it now. The area I am in is an established family neighborhood with few rental properties, so they are in high demand. It was never vacant for more than a day before I found another renter. I am being conservative (I hope) on take home now for renting it out with the aid of a management company and figuring in insurance, taxes, repairs, and figure I could get $600 a month out of renting. 

My question to y'all is about what you have done in a similar situation. How has working with a rental management been? I have never used one. Have you sold your house and regretted it? Have you kept your house and regretted it?

I appreciate your input.

 

[phyllisindallas]

Maybe I should say that the three year reference is because I have a child who is a sophomore in high school.

 

[phyllisindallas]

Sorry a little more. I am 54 now, but when I am retirement age I will have a small pension plus a part of social security (reduced because of my pension), so I will have more money when I am a little older.

I'm not actually looking at this lifestyle for saving money, although it is certainly a plus, and I will have to scrimp for a few years if I don't become a nomad, but I am not a stranger to that.

I'm sorry if this is too long-winded! I'm just so glad I found y'all and want your input, so being the hyper rational person I am, I feel I need to provide a lot of data.

 

[Moxadox]

I have used rental property management companies twice. The first was in Utah. My tenant took better care of the house than I did! They were marvelous, and when I was ready to sell the property, I sold it to them.

My second experience was a disaster. Drugs. They actually pulled the appliances out and sold them! Just awful. So I would be very sure to vet both the managers and prospective tenants personally, and carefully.

Bravo for doing your homework!

The Dire Wolfess

 

[Ella1]

I too would prefer to rent the house rather than sell, it sounds like your location and situation make it a good idea. You do need to vet your management companies, what you want and expect, what they do, etc, including their tenant contracts and their handling of tenants. I have a list of questions to ask property managers, and even things (a lot) I would want in a contract with tenants. Way too much info for this forum. If you are interested, PM me with your email address, and I'll gather some together for you. In the meantime, consider asking your questions on biggerpockets.com . You have to register, but the info will probably be very helpful.

 

[phyllisindallas]

Thanks Moxadox for your reply!

I hear you on nightmare tenants. My first tenant I had to threaten to evict after he was abusive to my female electrician (I won't give a long story on "eviction", but I did include "I'll rent you a Uhaul and be there in an hour" and "Sue me later if you don't like it." He became an ideal tenant after that. FYI he had been verbally abusive to me prior to that, so I knew he had a problem with women. I had been great to them overall- when I went to the house once to make a repair (after giving them notice) I noticed that they had the ac set to 85, so I asked the wife, and she said their electric bills were way high, so I had the insulation in the attic redone (I think 12" spray in). I was no slumlord.

My last tenant I had to go through the courts to evict, so I am familiar with the good and the (very) bad.

I still cleared a profit, even with those experiences.

Can I ask if you still are renting out your house?

 

[phyllisindallas]

 I have a list of questions to ask property managers, and even things (a lot) I would want in a contract with tenants. Way too much info for this forum. If you are interested, PM me with your email address, and I'll gather some together for you.

Hi Ella. Do you have a rent house? 

I think my email is public on my profile

 

[Ella1]

Not now. I rented two houses via property management over about 12 years. Good management co, until the very end, when I planned to move into that rental and end the management co. They "sided" with the tenant instead of continuing to protect my interests.
Up until recently I did look for another place to buy to rent out. That hasn't happened yet.

Do you want the information, will you read it? It will take me a while to get it together.

 

[MrNoodly]

You have experience being a landlord, so...

 

[phyllisindallas]

MrNoodly, yes, but I was hoping to hear from other people who have been in the same position.

 

[slynne]

I am in the same position kind of. I don't own my home outright and still have a mortgage. The house is worth $160k and I owe $60k still. Eventually I am going to have to make a decision but for now I have decided to keep the house and go part time in a mini van. I think the next step for me might be to take on a roommate. I haven't done that before because I am too much of an introvert and I get crabby with people around me. My hope though is that now that I have a minivan, I can have a roommate because I will have a space where I can hang out all by myself. I can park it in the backyard!

My issue with renting it is that the city codes for rentals are pretty strict and my house is no where near up to that code. It would cost me a lot of money to get it to that point. I live in a historic district so repairs can be costly. There is a requirement that every window open and stay open without something propping it up which means that I need a lot of window repairs and they have to be done in a very specific way. I can't just get new replacement windows. They also want every outlet to work but alas, the guy I bought my house from started to rewire everything and add outlets but he never finished the job. So about half of the outlets are not connected to any wires at all. I would have to hire an electrician to hook them all up and I imagine that would be expensive.

There is a really good property management company in town and I am acquainted with the owner which is an advantage of living in a small town. You just know who is honest and who isn't and who runs a business well and who doesn't. This guy has a good reputation. I have thought about asking him if his company has a service where they will bring a house up to the rental code. I know he has a whole maintenance team so maybe? Oh well, I wont have to make a decision like that for a few years.

 

[Moxadox]

You can simply remove the nonworking outlets and patch the walls. If there are no wires, you don't have to do anything. Of course, more outlets= better property value.

The windows are a safety issue and need to be addressed anyway. Firefighters do have axes if they need access, but if you have a gas leak you need that window (all of them) to open and stay open.

The Dire Wolfess

 

[Ella1]

Slynne, I suggest you too, to sign up to biggerpockets.com and ask for information there. Using your friend's PM company may not be the best solution. Consider getting bids from 3-5 general contractors first. Google them and check reviews. Biggerpockets members are knowledgeable and helpful. If you do choose a room-mate, from what I understand, they do not often work out well. My attempts at it never did, and I have not read of any that have. You will also want a contract for that, as well as thorough background checks.

Phyllis, re the PM questions, it occurred to me you can google most of that info: questions to ask a property management co There's a slew, indicating the importance.

As to the tenant contract, the last one I signed as a renter was long ago, and even then was on legal sized paper, single spaced, and several pages long. I think it was double sided. It spelled out everything. It was written by a lawyer, at the same time, I did not find it onerous. I stayed with them almost 20 years.
The lease terms suggestions I have, have been collected over a few years of reading BP.

 

[Moxadox]

Can I ask if you still are renting out your house?

Nope, sold them.

Had one tenant, an engineer for CXS, who decided to raise a litter of Rottweiler puppies in a beautiful old bungalow he rented from me. After I evicted him for not paying rent, I had to rip up carpet down to the subfloor. All soaked with dog pee and poop! Baseboards and door frames chewed. Thousands of dollars and so much aggravation! They garnished his wages...he kept changing little details, so the court had to keep after him. Of course I never got my money back. People are strange...

The Dire Wolfess

 

[phyllisindallas]

Hi Slynne

I'm not familiar with codes being different for rentals. I don't have to register or anything to rent my house out. Is it different where you are? (I am in Texas.) I don't get how it's ok for you to own and live in your house and not being able to rent it out.

I don't know where you live, but I'm guessing that if rental codes are strict, there might be a good market for rentals, meaning you might be able to charge a good bit. I suggest you do a search for rentals in your local paper or craigslist to get an idea of what you might be able to charge. It might be worth a few thou to get it rentable, if the payout is good.

You don't have to use a rental management company unless you won't be around to watch over the house. I never used one in the past- I was just a few miles up the road before, and had no problem managing it myself. If you decided to go on the road full time, like I am planning to, you will likely need one.

I don't think having a mortgage knocks any option out- if you rent the house out, it will help pay your mortgage. If you decide to sell, you will get out the equity in your house.

 

[phyllisindallas]

Nope, sold them.

Had one tenant, an engineer for CXS, who decided to raise a litter of Rottweiler puppies in a beautiful old bungalow he rented from me.  After I evicted him for not paying rent, I had to rip up carpet down to the subfloor.  All soaked with dog pee and poop!  Baseboards and door frames chewed.  Thousands of dollars and so much aggravation!  They garnished his wages...he kept changing little details, so the court had to keep after him.  Of course I never got my money back.  People are strange...

The Dire Wolfess

Yes, for sure rentals can be a huge pain. I should have taken my last renter to court for the damage she did, but I chose to put my sanity first. She apparently had been using the house to do tattooing (that's what the carpet cleaner told me anyway), and had animals in the house also, even though it was not allowed in the lease.

Anyway, still looking to get input from people on the road who either sold their houses or rented them out, and how they made their decision.

Thanks for everyone's input!

 

[tx2sturgis]

Third, if I sell my house and don't buy another, I get hit with a big tax bill. 

The IRS has some exemptions on capital gains earned on the sale of a house. If you have lived in it for 2 of the last 5 years, you may not owe any taxes when you sell it...

More info here:

https://www.irs.gov/taxtopics/tc701

 

[phyllisindallas]

Phyllis, re the PM questions, it occurred to me you can google most of that info: questions to ask a property management co   There's a slew, indicating the importance.

I am looking for perspectives from other people here who have been in a similar situation. I'm not actually looking for specific property management companies.

 

[phyllisindallas]

The IRS has some exemptions on capital gains earned on the sale of a house. If you have lived in it for 2 of the last 5 years, you may not owe any taxes when you sell it...

Thanks! I was not aware of that.

 

[phyllisindallas]

I would still love to hear from anyone who has been in a similar situation. Before becoming a nomad, did you sell your house? Did you rent out your house? Are you happy with your decision, or what would you have done differently?