Need Advice on renting your home out...

[bigmouth]

Hey everyone,

I want to buy a house real bad (for the investment opportunity), but I might have to up and leave a year after moving. How easy is it to just hand your home over to a property manager (to rent it out) and let them deal with it?

How many upfront expenses go into that, and what kind of commission do the managers take per month?

Is it typical that you have to dish out a mortgage payment on your own a couple of times a year since there may be gaps between when tenants move out and in.

Overall, is it a good idea to rent out property when you will be thousands of miles away and cannot supervise it?

Thanks. :icon_tong

 

[Brett327]

Hey everyone,

I want to buy a house real bad (for the investment opportunity), but I might have to up and leave a year after moving. How easy is it to just hand your home over to a property manager (to rent it out) and let them deal with it?

How many upfront expenses go into that, and what kind of commission do the managers take per month?

Is it typical that you have to dish out a mortgage payment on your own a couple of times a year since there may be gaps between when tenants move out and in.

Overall, is it a good idea to rent out property when you will be thousands of miles away and cannot supervise it?

Thanks. :icon_tong

I'm currently renting out my house in Whidbey while I'm on shore duty in SOCAL. I used one of the local property management firms and have really been happy with the whole deal. They take care of everything from advertising, background checks, maintenance, etc. They charge a 10% fee which is pretty much in industry standard. Most military places have lots of turnover, so vacancy is typically not a big issue, but it should still be planned for as a contingency. They deposit the rent into my bank every month, send me a statement and do all the record keeping for me to use at tax time. Bottom line - it's a great way to get free equity. I would recommend it to everyone. PM me if you have specific questions.

Brett

 

[zippy]

One reccommendation I have for anyone who rents their home... Bump up your liability insurance to the max they will let you (I think it is something around $1million). That may sound excessive, until something happens to someone in your house and you get sued over it- and a lot of lawsuits are for $1million.

Another recommendation is don't allow pets. Dogs and cats can destroy the interior of a house (Trim, doors, carpet etc.) and since they don't own the place, some renters really aren't going to care all that much.

 

[Schmuck]

"some renters really aren't going to care all that much."

Change that to most renters arent going to care.

 

[Brett327]

One reccommendation I have for anyone who rents their home... Bump up your liability insurance to the max they will let you (I think it is something around $1million). That may sound excessive, until something happens to someone in your house and you get sued over it- and a lot of lawsuits are for $1million.

Another recommendation is don't allow pets. Dogs and cats can destroy the interior of a house (Trim, doors, carpet etc.) and since they don't own the place, some renters really aren't going to care all that much.

All the required changes in insurance will be reviewed and discussed with your property management firm. You pretty much change from a homeowners policy to a hazard (fire, destruction, etc) plus liability.

Brett

 

[The Chief]

I want to buy a house real bad (for the investment opportunity) ...

Great opportunity, there are risks. Couple you pointed out. I bought almost every duty station, and even when I left Navy I moved around at lot and I continued to buy and most often rent when I left.

Points (in addition to already mentioned)

A. For Tax purposes you can depreciate your house, saves on taxes. At the other end, for example, I have a house in San Diego that I have depreciated to almost zero, when I sell it I will see almost the entire sales price as income (capital gains). Cannot even think about selling it, tried a "in kind" trade, no workie! So will leave to my estate in a trust.

B. Say you are stationed in Katmandu, you want to go home to visit folks. Well the IRS will allow you "periodic trips" to inspect your property, so the whole trip may be tax deductable.

C. Even though you own several houses, each time you buy a new house to live in at the new duty station, lenders (plus there are some tax advantages) gives you better rates as "owner occupied". Plus you have a good track record vs.a.vs mortgage payments and propertY cash flow, you most often get better interest rates.

D. Had a rental property, tenant did not pay for 6 months. Could not get a timely eviction notice, lost six months rent plus lots of legal fees.

E. I have found that military folks are best tenants, on many points. I personally interview each new tenant, if possible. Some tenants stay for years, one over 6 years. Have most but not all under a Property Management contract.

F. Pet issue is a biggie. Point number one in my lease is NO PETS. The tenant takes possession of rental unit, I turn a blind eye to that clause (usually at renters request) but it gives me great leverage during inspections and etc.

Summary: It is an excellent opportunity but need to do your homework and consider contingencies (what if I have to carry two mortgatges for xxx months), is the nearby base going to close, and all other you can think of.

Hope this helps. It is a big decision.

 

[Steve Wilkins]

Another recommendation is don't allow pets. Dogs and cats can destroy the interior of a house (Trim, doors, carpet etc.) and since they don't own the place, some renters really aren't going to care all that much.

As one who has a dog and a cat, I have to say that I really, really hate that attitude among folks who are renting their homes out. San Diego is notorious for this as is the Northeast. You either get the blanket statement No pets" or the rediculous "40 lbs or less." I would gladly pay a pet deposit (with most, if not all of it refundable) as a stipulation of renting. Those who know that their pets won't destroy stuff will gladly pay it. Another thing is to meet the pets. People who rent out their homes are obviously free to have what restrictions they wish (within legal limits of course). It's their property and I respect that. But don't make decisions to rent or not rent based on inaccurate information.

 

[Brett327]

As one who has a dog and a cat, I have to say that I really, really hate that attitude among folks who are renting their homes out. San Diego is notorious for this as is the Northeast. You either get the blanket statement No pets" or the rediculous "40 lbs or less." I would gladly pay a pet deposit (with most, if not all of it refundable) as a stipulation of renting. Those who know that their pets won't destroy stuff will gladly pay it. Another thing is to meet the pets. People who rent out their homes are obviously free to have what restrictions they wish (within legal limits of course). It's their property and I respect that. But don't make decisions to rent or not rent based on inaccurate information.

I'm with Steve here. I allow pets, but have a pretty large additional deposit to cover myself. I need new carpet in some spots anyway, so why not let the tennant pay for it?

Brett

 

[TurnandBurn55]

D. Had a rental property, tenant did not pay for 6 months. Could not get a timely eviction notice, lost six months rent plus lots of legal fees.

Lot of people I talk to (parents included) will only rent to military or government types for that reason... if you one of those types doesn't pay their rent, call their command and then there'll be hell to pay...

 

[The Chief]

I'm with Steve here.

Agree, dislike people with an "anti-pet" attitude.

Love dogs would never kick a tenant out because of a "reasonable" pet even though the lease clearly forbids it. Know a 35 pound Pit Bull will do more damage than a 70 pound Collie. Once had a tenant with an 8 ' Boa that had about 100 babies. Friend had tenant with Vietnamese Pig that grew from a cute 15 pound critter to a hog over 200 pounds.

Tough call either way and some folks given an inch will take a mile.

 

[Whalebite]

I would like to do this, have been thinking about it for awhile.
How does VA loan gaurentee and credit rating work into this. I think you can only use it on one property at at a time, and it has to be your prim residence. So you would prob use it while you live there and then refinance with equity, and use it again? When you buy more than one house does that not increase your liability, and lenders less likely to lend to you, especially when its not your primary residence?

How would you go about getting your first house, with no down payment? Has anyone gone through the VA loan gaurentee process? Any advise, tips?

Will be going from TBS to FL to begin flight training sometime durng the summer, any advise on where, when to get a house, so when you change schools you can still take advantage of it without moving too much?

 

[bigmouth]

I have a similar question as a follow-up. If it has to be your primary residence, then what do you do when you want to rent it out? The VA won't let you, since you wouldn't be living there anymore????

 

[The Chief]

The VA loan usually costs 1 or more points (percentage point of loan) when you close. "They" do not call it points, rather, cost of funds or some non-descriptive term. In simple terms, the VA guarantees your loan up to a certain amount without paying MGIC, that is you need no down payment. VA will apraise the property to determine loan amount. Two VA loans at a time are possible, but that situation is too complicated to explain here. Of course you can rent the property with a VA loan, if in good faith you intended to live in the house. Navy Federal Credit Union provides counseling, not touting them, they just come to mind.


Whether you should buy a house or not is a complex question. Even without a downpayment, it takes a fair amount of $$$ to go to closing.

Good luck.

 

[Clux4]

Definitely do not do college kids. Well if you have been to college, you will know.

 

[texasmid]

chief (or others)-

i might want to buy a house at each of my duty stations. if you can only use the VA on one at a time, are there any tricks to being able to afford a new down payment every three years or do you just have to save it all up every time?