Landlord wizards- what do you think about this?

[stashy]

Hi all, thanks in advance for any advice

I really have the travel bug, and its been my dream for years to travel long term with my girlfriend who I'm crazy in love with.  I've been at my job for 10 years and I think the most I could keep doing it is for another 2.  I don't hate my job I just have done it so long the thrill is gone.  I think I can pay my home off in just over 2 more years.  It's a beautiful mostly updated 1891 victorian house (1160sf) in a very hip and in high demand Denver neighborhood (west highland).  I think in two years it will easily fetch 500k if not more.  Its absolute madness what people are paying for houses around here lately.  Whether its right or not I'm emotionally attached to this house, I just really like it and it was my first home, and I've put a lot of energy into it (i've owned for 7 years).  I also don't think I'd be able to afford buying here again if I sold as in a few years it will cost more than I'm willing to spend.

I basically want to go travel for at least 6 months with my girlfriend 2 years from now.  My current master plan is to pay off the mortgage, then rent the house and use the income (probably after costs $ taxes about 2500-2700/mo) to mostly fund the traveling.  It has some quite fancy upgrades- the kitchen is stunning, all granite custom cabinets ect. and its a bit finicky because its an older house.  Definitely not your typical investment rental property.  I have never been a landlord and I'm smart enough to know I'm dumb about it.  Options I'm considering include hiring property manager, asking my next door neighbor (handy and a fellow stasher) to perhaps manage it as an airbnb rental, or rent furnished.  In my mind renting furnished it would be to a corporate type who is here short term, I would not have to store as much of my stuff, it would rent for more furnished etc...

As for the numbers it won't necessarily be a good investment to earn that $ amount on such a large sum but it would give me travel $ so I don't have to dig into my stash and I would like to come home and live in the house again after travel.  I crunched the numbers on selling it and buying another place when I get back but after realtor fees it would not make sense.  My biggest fear is having this place I've worked so hard on get damaged by careless renters.

Perhaps you've been in my shoes and learned from this or perhaps you're a seasoned landlord that can shine some light on this decision.

Thank you fellow mustachians- what a rad community!



Market Value: 440,000
Original Purchase price: 287,000
Interest Rate: 3.375
Mortgage Term: 15
Term remaining: 14
Amount remaining on mortgage: 102,000
Principal and Interest : 1026.00
Taxes and Insurance (the T&I of your PITI): 275.00
HOA costs: 0
Deferred maintenance notes: 0

[Rezdent]

I'm not officially a landlord wizard but I'll offer up a thought.
It sounds like you might have emotional attachment to the house.
If the house is truly gorgeous, you might consider selling outright.  Tenants can be notoriously hard on property.  They just don't have the same skin in the game as an owner.  It is hard to watch a house that you love be abused and it might be easier to sell to someone who appreciates the home as much as you do.

[waltworks]

If your goal is just basically to hang onto the house and make a few bucks on the side, just get a good management company and be VERY picky about tenants.

If your goal is to make the big bucks as a landlord, it's a terrible property, of course, but your secondary goal mostly makes sense.

_W

[escolegrove]

You just want a someone to maintain your house while you are off playing hooky! I think that is a great idea. You get someone else to pay your mortgage while you are out enjoying life There is nothing wrong with that! You can be a landlord for many reasons.

Have you thought about doing a corporate lease? That might be the most beneficial and get you the right tenants.

[stashy]

thats a great idea, I'll look into that.  Thanks for the answers

[marty998]

If your goal is just basically to hang onto the house and make a few bucks on the side, just get a good management company and be VERY picky about tenants.

If your goal is to make the big bucks as a landlord, it's a terrible property, of course, but your secondary goal mostly makes sense.

_W

Ahem. I know what you're like but I'm still going to say it anyway.

A property that has gone up in value by 53% in 7 years (6.3% annualised compound growth) has been a pretty good one for the OP.

You could do much worse buying a high CF property that goes backwards in capital growth.

[Setters-r-Better]

I think it's a good idea.  However,  if you have nice furniture,  then I would store it so it doesn't get ruined.  If you just have pretty basic,  inexpensive furnishings,  then renting it furnished could be ok.

[zephyr911]

In terms of cash ROI, high-end single-family residences tend to be the worst rental investments. Multi-family homes in affordable parts of town can fetch 2-3x the returns. And be realistic about expenses (the rule of thumb is 50% of gross, though an active landlord with a DIY mentality can reduce that substantially).
As noted previously, it's not a bad way to keep it from being a drain on your resources while you're off wandering, if that's really what matters the most to you.
Also: I STRONGLY suggest paid professional management. I have been an absentee landlord just a few hours down the road, and my inability to monitor conditions was disastrous for the enterprise. I ended up doing a deed in lieu of foreclosure because the house was wrecked, contaminated, uninhabitable, and unsaleable by the time the tenants were done with it. Traveling for months? Don't risk it.

[jb_in_DC]

Stashy, my girlfriend and I did something similar in October 2012 - rented our house for a year and traveled. 

Do it!  You won't regret it. If anything, you'll regret not taking more than 6 months (and it will be easier to find a tenant who is willing to sign a 12-month lease, as opposed to a 6-month one). 

I do not recommend going the handyman-neighbor route; when you are off in the jungle somewhere, the last thing you want is for your neighbor to be calling you on the phone with some emergency issue that needs to be managed; leave that in the hands of the property management company and be at peace while you're traveling.

We interviewed property management companies and picked one who took 10% of the monthly rent in exchange for handling any tenant  issues that arose.  Most companies we talked to charged between 8-12%.  They also offered to find and screen our tenants for $1500, but if we found them ourselves, they would do the screening for a much smaller fee.  So we had an open house one afternoon that we advertised on Craigslist, interviewed about a dozen prospective tenants, and sent our top candidate to the property management company to get screened. 

Make sure you are familiar with federal fair housing laws so you don't put anything illegal in your Craigslist ad/say anything illegal during your screening, and you'll be fine.

We rented our place furnished, which saved us a ton of money and effort in moving everything into storage. We took our personal items/things we'd truly be sorry to have broken/stolen/lost and put those into the attic and a locked storage room. 

Personally, I'd lean toward keeping the house.  You obviously are attached to it, and if you couldn't afford to move back into the neighborhood you like when you get home, why give it up?  If you're worried about damage to the house, talk to your property manager about an appropriate security deposit and screen your tenants really carefully.  Don't just take the first person who applies; look for someone who is going to take care of your place.

Finally, one last piece of unsolicited advice: put aside 3 months (or more!) of living expenses for when you return, so you don't have to immediately look for work after you get home.  Good luck on the trip! 

[arebelspy]

If your goal is just basically to hang onto the house and make a few bucks on the side, just get a good management company and be VERY picky about tenants.

If your goal is to make the big bucks as a landlord, it's a terrible property, of course, but your secondary goal mostly makes sense.

_W

Ahem. I know what you're like but I'm still going to say it anyway.

A property that has gone up in value by 53% in 7 years (6.3% annualised compound growth) has been a pretty good one for the OP.

You could do much worse buying a high CF property that goes backwards in capital growth.

Sure, and if one could see the future and thus rely on appreciation, great.  Assuming they don't have a crystal ball, it's not something most of us want to gamble our retirement on.  :)

(Especially when you can get good cash flow and appreciation, rather than just appreciation with little to no cash flow along the way.)

[stashy]

Stashy, my girlfriend and I did something similar in October 2012 - rented our house for a year and traveled. 

Do it!  You won't regret it. If anything, you'll regret not taking more than 6 months (and it will be easier to find a tenant who is willing to sign a 12-month lease, as opposed to a 6-month one). 

I do not recommend going the handyman-neighbor route; when you are off in the jungle somewhere, the last thing you want is for your neighbor to be calling you on the phone with some emergency issue that needs to be managed; leave that in the hands of the property management company and be at peace while you're traveling.

We interviewed property management companies and picked one who took 10% of the monthly rent in exchange for handling any tenant  issues that arose.  Most companies we talked to charged between 8-12%.  They also offered to find and screen our tenants for $1500, but if we found them ourselves, they would do the screening for a much smaller fee.  So we had an open house one afternoon that we advertised on Craigslist, interviewed about a dozen prospective tenants, and sent our top candidate to the property management company to get screened. 

Make sure you are familiar with federal fair housing laws so you don't put anything illegal in your Craigslist ad/say anything illegal during your screening, and you'll be fine.

We rented our place furnished, which saved us a ton of money and effort in moving everything into storage. We took our personal items/things we'd truly be sorry to have broken/stolen/lost and put those into the attic and a locked storage room. 

Personally, I'd lean toward keeping the house.  You obviously are attached to it, and if you couldn't afford to move back into the neighborhood you like when you get home, why give it up?  If you're worried about damage to the house, talk to your property manager about an appropriate security deposit and screen your tenants really carefully.  Don't just take the first person who applies; look for someone who is going to take care of your place.

Finally, one last piece of unsolicited advice: put aside 3 months (or more!) of living expenses for when you return, so you don't have to immediately look for work after you get home.  Good luck on the trip!

Just the feedback I was looking for THANK YOU!!!!!