Author Topic: I need help moving.. q's for home owners and people who live in apartments  (Read 3324 times)

zachd

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I've finally gotten my wife at least open to the idea of moving to a smaller place to save money.  But now I'm finding it's somewhat difficult to know how to go about doing this.
I guess I need to start at step 0 - determine if it's worth it or not.

We own a home that we live in.  I don't know how to find out what we could charge to rent it out.
I've looked on Zillow and it says something over 2K a month. That would be great, but I'm pretty sure that's too high.  But I really don't know.

What is the first step to find out how much we could actually rent it out for? 


nawhite

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What is the first step to find out how much we could actually rent it out for?

A) look at comparables on craigslist.com or padmapper.com or something similar
B) Talk to a rental agent (like a real estate agent but they usually specialize in rentals)

zataks

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Like nawhite said, talk to a real estate/rental agent.  Many real estate agent offices have rental divisions/agents.  They will come out and do a walk-through for you and tell you how much they would charge a tenant (and, of course, what their cut of that number will be, often ~10%).  But, as they are trying to get your business, this should be free. 
Be wary though, I had one agent walk through and give me what I felt to be an absurdly low number; she called a week later to see if I was ready to sign the agreement.  I had already chosen another agency to handle my property and she told me that she actually had wanted to rent it herself.  Questionable ethics, there.

+1 for padmapper though, too!

AMustachianMurse

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As someone who has lived in 8 apartments in 7 years, all I can say is that i've found all of them via craigslist.  So if you want to see what you're actually going to rent for, i'd compare there.

StarryC

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Once you look at comparables on craigslist to see if you can rent for more than your mortgage + insurance + costs, decide how much time you want to spend on this endeavor.  If the money is good (say you can rent for $2,000, and your mortgage and insurance etc. are $1,000) and you don't want to spend more time on it, then call a rental agency.  If you can't make that much, or you have time to spend, then you need to research the rules about landlording- How to find renters, how to advertise, rules about how quickly you need to repair things, get leases put together, etc.   Once you know the rate the agency will charge, the market rent, and how much time it will take to be a landlord, decide if that is worth it to you. 

Then look at where you'd move- are you thinking of renting or buying something?  What would be the total monthly cost of your alternative housing arrangement? (consider your utilities would probably go down, maybe commute down?) 

The "worth it" point is different.  Maybe $100 a month is worth it to you, maybe it would take $300 or $500 a month profit to make it worth it.  I think if your "profit" is less than $500/mo, you need to think carefully about how often you'll need to repaint/ fix things/ replace carpet/ or have the house empty based on tenants.  (You could run through a year's profit on a $2,000 rental at $500/mo profit, in just 2 months of vacancy and expenses to paint, care for the yard, and clean up the place from a bad tenant.) 

zachd

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Thanks.. I need to figure out what it might rent for first because if it's not $2000 or so then it's doubtful we will be going anywhere. Mortgage is $1500.  There are houses of similar size that rent for anywhere from $1400 to $2700 so comparables aren't really helping me much.  I do need someone to take a look and tell me and yes I'd need someone to manage it most likely.  If it's worthwhile to rent would like to find an apt or house to rent that is around $900 a month. 

So yes I'll find a rental agent first.   If anyone has a recommendation in Austin let me know. I'm on some neighborhood newsgroups I can ask around.

nawhite

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Also, if you are both on board with moving to a smaller place, why do you need to rent your current home, why not just sell it outright and buy a smaller house?

zachd

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Well, that is a good question. My thought is we have been in this house 12 years now and we would make a lot if we sold it outright. But I don't know if we are ready to let it go it's in a great location.  My goal is two fold - A. Accelerate paying down some debt we have and B. Try living in a smaller space.   If it turns out we hate a smaller space or an apartment, then we would still have the house. But if we stick it out for a year or two we would be in good shape to then buy another home if we wanted to and eventually build a small home.  I'd like to think our current home would be good for some rental income if we can rent it for $2k or so as mentioned.  But the property tax on it is pretty high so that might be a factor.

Freedom2016

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You may want to post this on the Real Estate board. As I understand it there are some well established rules of thumb to determine whether a rental will be profitable vs. a money pit and the folks on that board will be able to help.

Rebecca Stapler

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I would tour the places that are listed for rent and compare them to your home.

When calculating whether the cost is worth it, I would also factor in a loss of 1 months' rent each year -- either due to maintenance and repairs or the home being vacant while you find a new tenant, etc. Some years, you will go without extra expenses, and others you won't. But it's wise to count on just 11 months of rent.

Another thing to consider is that, although your mortgage won't go up it the future, your taxes might (depending on where you live) and rental income can go up each year too. That's the plus side of renting out your current place. So, if you want it for a long term rental, breaking even in the first few years is OK as long as you continue keeping the rent at market value.

But like PP said, there are some ideal ratios for costs : rental income that you should aim for. (I don't know what they are, though, because I rent!)

That said, unless you're interested in being a LL, I would consider shopping around for a smaller house and selling the one you're in now.