Renting out current house?

[LearningMustachian72]

We plan to move in 5-7 years as we will outgrow our house.

Mortgage is $2,200 at 3.125% fixed rate, could rent for $2,800 monthly safely, most likely more. We would plan to use a property manager. My only concern is house has some maintenance (e.g. switched for heat tape need to be flipped when it snows to avoid ice dams, yard if kept up, is decent amount of work but I’m fine letting it go).

We are debating (1) renting out and not making many updates as it in good shape for a rental or (2) making updates we would enjoy that would also help with resale.

For those of you that have managed rental properties, what would you do?

[Mustache ride]

I haven’t managed rental properties, but the timeline presented is too long to really make an accurate decision. Who knows what the house value and rent would be in 5-7 years.

I’d probably lean towards making updates that you would enjoy since you will be there for a good bit longer and make adjustments on the fly as you get closer to execution.

[Omy]

Most tenants are pretty awful at maintaining yards (and houses). Expect a disaster area when you stop renting it out.

You will need to remind the tenant (or instruct the property manager) to do any preventative maintenance.

There are very few good property managers out there. They will collect rent and spend more than you would on repairs. Make sure you're prepared to manage the manager.

Without a crystal ball, I'd lean toward selling.

[aasdfadsf]

5-7 years? Everything will change by then. Are you really saying that you're planning now on how to make this work that far out? Because you can't really do that.

You should always work on your house to make it as good as you're willing to make it. You should do that for you, but if it also makes it good for a renter down the line, then that's great.

Don't ever fix your own home up over and above what you want just because you envision renting it one day. Believe me, renters will just do what they want. Some will make it better and some will make it worse. But don't spend gobs of money making it nice above and beyond your own standards, because that won't mean shit when you've got other people in there tearing it to pieces.

[GilesMM]

Mortgage is only part of the story. What are your average monthly costs, looking back several years including taxes, insurance, repairs and maintenance?  They would need to total well under the rent in order to cash flow positively.  Don't forget property management fees of 10-20% of rent.  If you paid $625,000, let's spitball $500/mo for maintenance, $750/mo for taxes and $200/mo for insurance.  That's $2200+500+750+200=$3650/mo cost.  Add in prop management 15% and you need rent of
$4300/mo to break even.


Your mortgage note suggests you borrowed $500,000.  If we estimate you put 20% down, that's $125,000 you have invested.  If you would like 10% annual return on that, that's $12,500 or about $1000/month or rent of $5300/mo.  See the problem?

[clarkfan1979]

5-7 years? Everything will change by then. Are you really saying that you're planning now on how to make this work that far out? Because you can't really do that.

You should always work on your house to make it as good as you're willing to make it. You should do that for you, but if it also makes it good for a renter down the line, then that's great.

Don't ever fix your own home up over and above what you want just because you envision renting it one day. Believe me, renters will just do what they want. Some will make it better and some will make it worse. But don't spend gobs of money making it nice above and beyond your own standards, because that won't mean shit when you've got other people in there tearing it to pieces.

When making repairs or improvements, you can make decisions that might be better for maintenance for renters. Vinyl plank flooring is way better for rentals than carpet. If you can install yourself while you are living at the house that would be a good move to get it rent ready. 

Edit: Based on the information provided, I'm assuming $2200 is their total PITI. In 5 years, if the rent is $3300/month and your PITI is $2300/month, I would personally rent it out. For someone who self-manages, I estimate $200/month for yearly repairs and $200/month for long-term cap-ex, repairs that need to be replaced once every 15-20 years (roof, furnace, hot water heater, outside paint, flooring). Property management would be 8%-12%. You still have to manage the manager.