Quick background. Wife has to retire in a year and a half. She clearly is starting to worry about filling her days in retirement. I will continue to work. Which brings us to the old homestead.
I want to sell the McMansion and move into something smaller and invest the remainder in a conservative mix of low cost index funds. Wife wants to move but hold onto the McMansion and rent it out (again I suspect that she wants to do this primarily because she is worried about not having enough to do). I'm trying to get her (and me) to look at this possibility from a strictly business perspective and hope that some of you will take me by the hand since we have never owned investment/income producing property.
Assuming that lease makes tenants responsible for things such as lawn care, water/sewer. garbage fees, electric and plumbing repairs...I believe that would leave us with anticipated expenses of :
Mortgage (principal and interest)
RE taxes (which will increase since we will no longer have a homestead exemption)
Property Insurance (Is that likely to increase once it is no longer owner occupied?)
Pest Control
HOA and maintenance fees (and any special assessments)
Structural Repairs
Am I missing anything obvious on the likely expense side of the ledger?
Now assuming after calculating these expenses if we can get enough rent to be profitable what would be a reasonable way to...
1. Spitball carrying costs. I know it will vary tremendously depending upon an almost infinite variety of factors but how do you allow for the fact that the house will likely be sitting vacant for at least part of the time?
2. Determine lost opportunity costs (hope I'm using the term correctly)? Let's say that after agent commission, closing costs and paying off mortgage balance we have a few hundred thousand left over. If we stick it in a very conservative mix of investments (she's early 60s. I'm late 50s) what is a reasonable rate of return to expect so that we can weigh what we would be giving up in investment returns as a result of retaining ownership of the house.
Any other factors that I appear to be missing?
Thanks.