Author Topic: Making our home into rental  (Read 1097 times)

esq

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Making our home into rental
« on: June 15, 2018, 09:38:29 AM »
We have lived in our beautiful home for 23 years. Raised our children here, and the youngest is headed off to school. I'd like to downsize to something smaller and closer to my work (current commute 2 hrs per day) . I would want to rent something cheap for now, not ready to buy.

About the house: it's 3000 sf 2 story 4br, 2.5 bath, 2 car detached garage, built by my husband (retired carpenter) . Beautiful trim and custom cabinetry. It will need paint and carpet or tile, kitchen and baths will need new countertops, cabinets need paint. Eventually we'll need a new roof. Downstairs ac will be about $3000 to replace, (we know a guy) . Those are the main things.

Numbers: House is paid off. Taxes ~$5500 annually, hoa dues $500, homeowners insurance ~200 monthly, although with renters we might need to raise this. I will need to take out a loan for most of this updating. Similar area houses are renting for $2000 to $2300. To be conservative, I'm not counting on more than 2k per month. Right now the kids have to rely mostly on grants, loans, scholarships and part time work to pay for school. I'd like to be able to help a little, as well as putting away for retirement (no FIRE here, I'm already 60). So figuring on ~$1000 per month income.

If we sold as is, I think it would sell for ~$200,000 and let the buyer do the updates. Putting that money away for retirement (in 10 yrs) would have more risk and not net us as much as renting, I don't think.

It's a little overwhelming thinking about getting the house sorted through, packed up, moving and then dealing with renting it out. Looking for input and suggestions.
« Last Edit: June 15, 2018, 09:40:32 AM by esq »

Catbert

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Re: Making our home into rental
« Reply #1 on: June 15, 2018, 09:50:27 AM »
One thing to keep in mind when renting a former personal residence is that at some point renters will do damage to it.  That could be ripping out banisters handcrafted by your husband or putting holes in the kitchen you love or whatever.  If that would kill you then sell it, don't rent.

I'll leave it to others to discuss the financial aspects of turning it into a rental.

esq

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Re: Making our home into rental
« Reply #2 on: June 15, 2018, 10:47:37 AM »
I did think about this. It wouldn't kill me, but my husband wouldn't be happy. I specifically was thinking about his curved wood French volute at the bottom of the stair rail. Our kids knew not to hang on it.

lbmustache

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Re: Making our home into rental
« Reply #3 on: June 15, 2018, 11:10:18 AM »
You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway. A good screening process (especially if you do the renting yourselves, vs a property management co) will help immensely.


As far as the updates go, I would hold off on some till you've rented for awhile and have a good feel for it, and do a few before renting. For example, I would say a prudent update would be to ditch the carpet for laminate or tile, either one much easier to maintain and way less likely that it will go to shit with a tenant (especially tile... I have it and I am HARD on stuff, it appears to be nearly indestructible). The countertops - eh. Unless they are visibly falling apart or chunks are missing (idk what material you have now) it might be OK to string those along for another year or so.

tralfamadorian

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Re: Making our home into rental
« Reply #4 on: June 15, 2018, 02:06:42 PM »
You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway.

It violates fair housing to discriminate based on the number of people (up to a certain point) or age of the persons in a household.

OP, is the $500 HOA per month or year? At per year, your house sounds like a decent rental property.

But as mentioned above, it sounds like you all might have too much of an emotional attachment to want to deal with tenant damage. What if your tenant's kids swung from the banister, tearing it from the wall? And the tenant decided to paint the custom cabinets grey because bare wood cabinets are not as fashionable at the moment (even if the lease says no painting)?

esq

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Re: Making our home into rental
« Reply #5 on: June 15, 2018, 03:06:51 PM »
You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway. A good screening process (especially if you do the renting yourselves, vs a property management co) will help immensely.


As far as the updates go, I would hold off on some till you've rented for awhile and have a good feel for it, and do a few before renting. For example, I would say a prudent update would be to ditch the carpet for laminate or tile, either one much easier to maintain and way less likely that it will go to shit with a tenant (especially tile... I have it and I am HARD on stuff, it appears to be nearly indestructible). The countertops - eh. Unless they are visibly falling apart or chunks are missing (idk what material you have now) it might be OK to string those along for another year or so.

This is where we're clueless. I guess there's plenty of resources out there about how to screen for folks who aren't going to trash your house. And you might be right about at least the countertops. They're tile, cracked in a few places, but perfectly serviceable overall.

You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway.

It violates fair housing to discriminate based on the number of people (up to a certain point) or age of the persons in a household.

OP, is the $500 HOA per month or year? At per year, your house sounds like a decent rental property.

But as mentioned above, it sounds like you all might have too much of an emotional attachment to want to deal with tenant damage. What if your tenant's kids swung from the banister, tearing it from the wall? And the tenant decided to paint the custom cabinets grey because bare wood cabinets are not as fashionable at the moment (even if the lease says no painting)?

HOA is $500 per year, and the numbers really do work out pretty good. The more I think about it though I'm just not sure about the whole renting thing, dealing with renters, damage to the house, etc. It might be worth taking the monetary loss by selling as is, just investing the profits and be done with it, and having peace of mind, you know? This way we wouldn't have to spend money on updating, too.

(All the cabinetry, moldings and transoms are painted antique ivory enamel, btw =)...)  What do other people do who rent out nice, expensive homes?

bacchi

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Re: Making our home into rental
« Reply #6 on: June 15, 2018, 04:12:49 PM »
You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway.

It violates fair housing to discriminate based on the number of people (up to a certain point) or age of the persons in a household.

Not necessarily. There are exclusions, including "single-family housing rented without the use of advertising or without a real estate broker, as long as the landlord owns no more than three such homes at any one time
," which sounds like may be the case here.

https://www.nolo.com/legal-encyclopedia/free-books/renters-rights-book/chapter5-2.html

Your state or municipal area might have stricter laws, however.

tralfamadorian

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Re: Making our home into rental
« Reply #7 on: June 15, 2018, 04:50:28 PM »
You could always choose to rent to a couple with older kids (or no kids at all), but realize that sometimes people are shitty anyway.

It violates fair housing to discriminate based on the number of people (up to a certain point) or age of the persons in a household.

Not necessarily. There are exclusions, including "single-family housing rented without the use of advertising or without a real estate broker, as long as the landlord owns no more than three such homes at any one time
," which sounds like may be the case here.

https://www.nolo.com/legal-encyclopedia/free-books/renters-rights-book/chapter5-2.html

Your state or municipal area might have stricter laws, however.

The "without the use of advertising" part is what makes this unsustainable though. No craigslist? No zillow? No sign in the yard?

From that same site:

Quote
Discrimination Against Families
While some landlords don’t like renting to tenants with children, fearing the noise and wear and tear that kids might cause, the federal Fair Housing Acts prohibit discriminating on this basis. A landlord may not legally turn away or evict a tenant because he or she has children or because an applicant or tenant is pregnant. Even if the landlord has a worthy motive, such as believing that children won’t be safe in the building or the neighborhood, it is illegal to deny the tenancy on that basis or to make other discriminatory moves such as steering families to certain parts of the property (usually the back).

Some landlords try to get around the laws prohibiting discrimination against families by setting unreasonably low occupancy limits, such as only two people for a two-bedroom unit. This too is illegal, as it has the effect of excluding families. Federal law (in this case, an opinion letter written by the Department of Housing and Urban Development) has established minimum occupancy standards that regulate how low an occupancy can go and still be legal. In general, landlords must allow at least two persons per bedroom. Landlords can be more restrictive only in rare instances, when they can show that legitimate business reasons justify a more restrictive standard. For example, a policy of only three persons in a two-bedroom unit might pass muster if the landlord can prove it is truly based on the limitations of the plumbing system or some other aspect of the building’s infrastructure.

tralfamadorian

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Re: Making our home into rental
« Reply #8 on: June 15, 2018, 05:03:11 PM »
(All the cabinetry, moldings and transoms are painted antique ivory enamel, btw =)...)  What do other people do who rent out nice, expensive homes?

They sounds beautiful!

I do have one A+ rental. The property is small and the rents are high ($3+/sqft/mo) so it's not too difficult to repair most damage from a security deposit. For example, the countertops may be carrera marble but there's only 8ft of them. My property manager does walk-throughs every 4-5 months.