Hi MMMers,
I've read many of these threads but haven't found a situation exactly like this one. We own a second home on the NC coast. My mother bought it and we've spent 20 years renovating, as much as a hobby as a resource. I bought it outright from my mother five or six years ago--all cash, so no mortgage owed. We only get down there about two to three times a year for a few days, since it's a six-hour drive. (Usually it's a day or two of reno work and a day or two of vacation.) The work is nearly done but visiting seems more like an obligation than a pleasure at this point--drive down, check up on maintenance, clean, fix everything that eroded since the last visit, etc.)
We're thinking of renting it out. It's a modest older home, 3 BR, 1 bath, with new HVAC, roof, siding, plumbing, appliances, paint, etc. Checking the area comps, we'd probably only get $650-$700 a month in rent. We keep water and power turned off (water lines drained) when we're away, so my main cost is $80 a month for mowing. The guy who mows it lives in the neighborhood and keeps an eye on the place, so I consider him more of a friendly caretaker, so I would continue doing this even with a renter. Taxes and insurance are relatively low, so my average annual cost of the house is less than $3,000.
While that is low, it still feels like a needless liability when my goal is FI. I would sell it but my late brother did a lot of the reno work, and my mother is emotionally attached to the house, so I can't sell until she has passed on (she visits it about once a year and is fine with me renting it out.) I definitely want to do one-year leases rather than churn or AirBnB because of our distance, which prevents me handling emergency repairs and problems on the spot.
My accountant said there would be some favorable tax advantages in depreciation, and I understand there would be limits on how much I could stay there between rentals. Figuring an extra $1,000 a year for unanticipated surprises in addition to the bigger risks, with the hope of making $3-4K a year, does it seem worth the hassle of trying to turn this liability into a small asset?
Problems I can foresee is possible need for a property manager, on-call repair person, umbrella insurance. We also want to be respectful of the neighborhood, which is mostly senior citizens who've lived there all their lives.
Thanks.