Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Renting out your home?
Old 10-28-2006, 01:09 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Renting out your home?

I found this other thread, but wanted to ask a question not covered there.

Living in a high-cost, urban, area is an impediment to retiring. I've considered moving but think the risks likely outweigh the benefits. Something I've thought about recently is renting out our apartment while we live in other areas on a "trial basis". I'm concerned, however, that if we decide to return home we may not be able to reclaim our apartment from the tenant. I've heard that evictions can be a nightmare. What risk do I run that the tenant will not want to leave once their lease is up?
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Renting out your home?
Old 10-28-2006, 03:32 PM   #2
Full time employment: Posting here.
Arif's Avatar
 
Join Date: Jun 2005
Posts: 761
Re: Renting out your home?

I see you live in NYC so I am assuming that is where you're home is located. If I were you I would ask other landlords in your area this question. Their might be a RE investment club nearby that you could visit to get a feel for the issues of being a landlord in NYC. From what I have heard, NYC is a strange and difficult (not impossible) place to be a landlord so thread carefully.
__________________

__________________
You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes.
Arif is offline   Reply With Quote
Re: Renting out your home?
Old 10-28-2006, 05:37 PM   #3
Full time employment: Posting here.
 
Join Date: Nov 2003
Posts: 926
Re: Renting out your home?

Quote:
Originally Posted by 3 Yrs to Go
I found this other thread, but wanted to ask a question not covered there.

Living in a high-cost, urban, area is an impediment to retiring. I've considered moving but think the risks likely outweigh the benefits. Something I've thought about recently is renting out our apartment while we live in other areas on a "trial basis". I'm concerned, however, that if we decide to return home we may not be able to reclaim our apartment from the tenant. I've heard that evictions can be a nightmare. What risk do I run that the tenant will not want to leave once their lease is up?
Significant.

JG
__________________
Some of us have pretty stories, about good friends, good times and noodle salad.
Mr._johngalt is offline   Reply With Quote
Re: Renting out your home?
Old 10-28-2006, 10:11 PM   #4
Recycles dryer sheets
 
Join Date: Oct 2003
Posts: 175
Re: Renting out your home?

My biggest concern renting out my own home would not be to get my home back. The biggest issue to me is in what shape I would get it back.

As a homeowner you live in your own house and treat it as such. A renter is only staying there temporarily until they move on. You will have considerably more wear and tear than if you were to live there. I have some great renters but I would not want any of them to stay in my own home.

Most states have some apartment owners or landlord organizations or whatever. You can check out what leases they have and what to expect. Do not use a generic lease that my be in violation of state law. I am in TX which is very landlord-friendly. You can always rent something out month-to-month (or maybe do a 3 month lease first). On a month-to-month lease, either you or the renter can give 30 notice to terminate the lease without any reason (btw, that is not the same as eviction). If you get someone with a good rental history and good credit, they will probably not give you too many problems. Getting a good tenant by careful screening solves 99% of the potential headaches.

Vicky
__________________
vic is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 12:10 PM   #5
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Re: Renting out your home?

I'm currently in the market looking to buy my first home, and am toying with the idea of renting out some of my spare bedrooms.

Do you have enough rooms where you could still live there when you're done 'exploring', or are you looking to rent out your entire house?
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 01:28 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: Renting out your home?

Quote:
Originally Posted by Peter76
I'm currently in the market looking to buy my first home, and am toying with the idea of renting out some of my spare bedrooms.

Do you have enough rooms where you could still live there when you're done 'exploring', or are you looking to rent out your entire house?
Yikes. It'd be cozy. We have a 1,000 sqf, two bedroom apartment, which is fine for the two of us.

Then again, after I told the missus that we'd be sharing our place with a stranger I suspect it would be just me moving back . . . so a roommate might work out after all.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 04:01 PM   #7
Full time employment: Posting here.
flipstress's Avatar
 
Join Date: Jun 2004
Posts: 537
Re: Renting out your home?

Can you rent to friends? They might take better care of your place.
__________________
flipstress is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 05:52 PM   #8
Thinks s/he gets paid by the post
simple girl's Avatar
 
Join Date: Sep 2006
Posts: 2,505
Re: Renting out your home?

Quote:
Originally Posted by 3 Yrs to Go
I've heard that evictions can be a nightmare. What risk do I run that the tenant will not want to leave once their lease is up?
We are in a similar situation (renting out our place while on the road for work) and had to face the same questions. We researched a lot on mr.landord.com. I would suggest you check it out, perhaps post your question there, too.

I think there is always a risk that you'll have a problem tenant, but the risk goes down the more selective you are. I would expect more wear and tear on the property than if you lived in it.

If you did have trouble with an eviction, how hard would it be for you to live in your new area a little longer while the eviction is resolved?

Risk vs. reward. How much do you want to try out other areas? How much will investigating this help you discover if you can retire earlier in a more low-cost area that you like?...

simple girl
__________________
simple girl
less stuff, more time

(49, married; DH 53. I am fully retired as of 2015 (well ok, I still work part-time but only because I love the job and have complete freedom to call off if I want to travel with hubby for work), DH hopes to fully retire 2018 when he turns 55 to access 401K penalty-free...although he may decide to do part-time consulting)
simple girl is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 08:30 PM   #9
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 927
Re: Renting out your home?

Is there a college anywhere near you? If so, maybe a carefully screened grad student would work?

(S)he might be easier on the house (studying instead of partying -- at least in theory), and would depart upon graduation, leaving you to move back or rent again, as the spirit moves you.

I've been thinking along these same lines, living as I do on the equally expensive west coast. Thanks for the question.
__________________
Caroline is offline   Reply With Quote
Re: Renting out your home?
Old 10-29-2006, 09:52 PM   #10
Recycles dryer sheets
 
Join Date: Oct 2003
Posts: 175
Re: Renting out your home?

When it comes to eviction, most states have a very fast streamlined process. Within a few weeks, most delinquent tenants will have had their court decision and if you like the constable can supervise you while you physically throw their stuff out. I am in TX and within 10-12 days I will have them out (vs 6 months for small claims) - excellent landlord friendly state anyway.

When you are renting: avoid friends at all costs unless you want trouble or lose your friends. Being a landlord is business. Always put EVERYTHING in writing, and definitely the lease. Important stuff goes by certified mail etc.. I did not like one of my tenants (high maintenane whiner) - all it took was 30 days notice to get her out - just by giving a notice of non-renewal. She was a professional property manager and knew that that was it - nothing to contest about that. Otherwise I would have had the court have taken care of her.

One of my tenants will be losing his job in a few weeks. Most likely he will default on the rent. He will be evicted in that case. It will probably even not go to court. I will definetly not lose any sleep over it.

The biggest problem with evictions is that these people may be angry, they will lose their damage deposit anyway and they may want to teach you a lesson by remodeling your place.

However, if you got a place in a good neighborhood and you screen your tenants carefully, you should be ok in most cases. I avoid roommate situations and most students. Ideal for me is a couple where at least one works and FICO >700.

Another thing you have to remember is that people will expect that you take care of stuff when it breaks (and you should, do not let tenants 'fix' stuff). You never know when you get a call that there is one foot of sewage in the tub and you end up having the entire sewer line replaced. Difficult to do when you are somewhere else. Of course you can always hire a property manager

Vicky
__________________
vic is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 03:15 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
Re: Renting out your home?

new york city is very landlord unfriendly . i would never be a landlord again. it can take 3-6 months to get a tenant out and you must have maintained impeccable records.

the courts wont even open a case for you unless you can prove that you didnt get the rent. the judge can't just go okay mr tenant show us you payed the missing months rent, nope you need enough proof to get the court to ask the tenant that question first.

the only way is to exchange recepts especially if cash is involved. you give the tenant a receipt for the cash and they give you one .

now as stupid as it sounds you go to court and layout the recepts showing your missing receipts for the months you are owed rent. you could have thrown them away but the fact is it opens the case up for the judge to ask the tenant for his proof he payed.

make sure you have a lease. i thought i would have an advantage with no lease to do more things frreely. nope , without a lease how do you prove the rent amount?

my tenant owed a few months rent and threatened bankruptcy if i attempted to collect any of it. try going to court to evict someone after bankruptcy here in nyc, its a joke.
__________________
mathjak107 is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 03:27 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
Re: Renting out your home?

heres a few other things we learned about being a landlord in nyc....

if you want a delinquent tenant out with out risking the fact that the tenant will bring a hundred bucks to court to put towards the rent and the judge will let them stay then you can allow a family member to live there and use those grounds .

heres the rub there too. you cant just tell the tenant or mail a certified letter... it must be done by a process server and it must have special wording to the effect that you own no other real estate to let your family member have.


it must be filled by a certain time of the month or else you give them another month.. if you blow any of the above the court will not accept the documents and the tenant gets another few months to stay without paying.

nothing is a problem in real estate until its a problem and nyc is the worst place on earth for a problem, you better have deep pockets and lots of time

i was a landlord for 20 years and for 18 years it was good, the problems i hit with a bad tenant have made me never want to be a landlord again.
__________________
mathjak107 is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 04:30 AM   #13
Full time employment: Posting here.
 
Join Date: Nov 2003
Posts: 926
Re: Renting out your home?

Quote:
Originally Posted by vic
When it comes to eviction, most states have a very fast streamlined process. Within a few weeks, most delinquent tenants will have had their court decision and if you like the constable can supervise you while you physically throw their stuff out. I am in TX and within 10-12 days I will have them out (vs 6 months for small claims) - excellent landlord friendly state anyway.


Vicky
I have owned rental property in four (4) states. It seems to me that Texas
is the most "landlord friendly" which should not be a surprise I guess.

Disclaimer: For all you would-be RE investors and Trump wannabees,
there are still the fire ants, rattlers, gun-nuts, scorpians, heat, dust
etc etc

JG
__________________
Some of us have pretty stories, about good friends, good times and noodle salad.
Mr._johngalt is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 12:22 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,705
Send a message via Skype™ to kcowan
Re: Renting out your home?

We have friends who are currently on holidays in Manhatten. They rented a 2 BR/2 bath apartment west of the park for 2 weeks. Putting your place in such a pool might get you comparable returns while leaving the management of the place to someone else.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 02:01 PM   #15
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Re: Renting out your home?

A quick question for Martha and the other non-professional experts

If you form an LLC that owns real estate and rents it out to people to live there, is there a risk of a red flag if you take your mortgage interest expenses, real estate taxes, insurance, and depreciation, and it results in a constant annual loss for many years? Or does the IRS realize that when you add all of these together, it may result in consistent tax losses from year to year?

__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 02:13 PM   #16
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: Renting out your home?

Now I am feeling shy. Maybe my good buddy retire@40 can give you some guidance.

I and a lot of people I know have rental property investments that threw off losses for a number of years. And now I am paying for in by taxes at 25% on recapture of depreciation.

How many years are you talking? As debt gets paid down and property depreciates, the chance of losses go down as well.

Or, are you saying there is no profit motive or there is some sham aspect to the generation of a loss?
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 03:27 PM   #17
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Re: Renting out your home?

Quote:
Originally Posted by Martha
Now I am feeling shy. Maybe my good buddy retire@40 can give you some guidance.

I and a lot of people I know have rental property investments that threw off losses for a number of years. And now I am paying for in by taxes at 25% on recapture of depreciation.

How many years are you talking? As debt gets paid down and property depreciates, the chance of losses go down as well.

Or, are you saying there is no profit motive or there is some sham aspect to the generation of a loss?
No, no sham...I stay clean when it comes to the IRS.

My idea: find a house that is in moderately good shape, but in an area where they are tearing down 250k-350k homes to put up 800k-1MM homes. Rent it out for a while (5-10 years). Based on my back-of-the-envelop calcs, the rent would barely cover (or perhaps barely is short) the mortgage. Yes, I know the hazards of having cash on hand for a bad water heater/A/C/leaky roof, etc..

After the tenants run it down, tear the house down, build a nice new one (myself), and put the new house on the auction block.

Until I tear it down and build the new one (or perhaps I will live in the new house once it's built), the rent income will not exceed the house depreciation, mortgage interest, and real estate taxes. So I'd have 5-10 years of net real estate income losses (in all likelyhood).
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 05:18 PM   #18
Full time employment: Posting here.
Patrick's Avatar
 
Join Date: Mar 2005
Location: Northern, Florida
Posts: 925
Re: Renting out your home?

Quote:
Originally Posted by MooreBonds
So I'd have 5-10 years of net real estate income losses (in all likelyhood).
But you'd have to recapture all that when you sold the property, right?
__________________
Retired in 2006 at age 49.

"Who among us is smart enough to learn from the mistakes of others?" - Voltaire
Patrick is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 05:28 PM   #19
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Re: Renting out your home?

Quote:
Originally Posted by MooreBonds
No, no sham...I stay clean when it comes to the IRS.

My idea: find a house that is in moderately good shape, but in an area where they are tearing down 250k-350k homes to put up 800k-1MM homes. Rent it out for a while (5-10 years). Based on my back-of-the-envelop calcs, the rent would barely cover (or perhaps barely is short) the mortgage. Yes, I know the hazards of having cash on hand for a bad water heater/A/C/leaky roof, etc..

After the tenants run it down, tear the house down, build a nice new one (myself), and put the new house on the auction block.

Until I tear it down and build the new one (or perhaps I will live in the new house once it's built), the rent income will not exceed the house depreciation, mortgage interest, and real estate taxes. So I'd have 5-10 years of net real estate income losses (in all likelyhood).
I don't see a problem. As Patrick mentioned above, you will have to recapture any depreciation for which you received a tax benefit when you sell the place. My question would be whether it makes business sense given that the property might not even cash flow.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Renting out your home?
Old 10-30-2006, 06:32 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: Renting out your home?

Quote:
Originally Posted by simple girl
We are in a similar situation (renting out our place while on the road for work) and had to face the same questions. We researched a lot on mr.landord.com. I would suggest you check it out, perhaps post your question there, too.

I think there is always a risk that you'll have a problem tenant, but the risk goes down the more selective you are. I would expect more wear and tear on the property than if you lived in it.

If you did have trouble with an eviction, how hard would it be for you to live in your new area a little longer while the eviction is resolved?

Risk vs. reward. How much do you want to try out other areas? How much will investigating this help you discover if you can retire earlier in a more low-cost area that you like?...

simple girl
Well I won't quit my job until I can afford to live right where I am now. We like it here and we don't really want to take a flier on moving to what we hope will be a lower cost area just to speed up the retirement process. I fear that after we've picked up and moved, we might wish we hadn't.

But regardless of whether we can afford to live where we do, I can't help but think we'd have a higher standard of living and more financial security if we lived somewhere else. And besides, who's to say we wouldn't like someplace else better? We'd also like to try living overseas for a while. Maybe one of those places would stick and we wouldn't have to worry about coming back but we'd also like the option of returning to a place we know we like.

So the idea of renting out our place and exploring other environments has some real appeal.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Retiring in Texas? Rustic23 Life after FIRE 48 04-07-2007 03:20 PM
RE effect on Home Insurance omni550 FIRE and Money 6 03-15-2007 10:08 AM
Home equity not a retirement solution? REWahoo FIRE and Money 96 07-31-2006 11:34 AM
Trailer Home with Land or Small House...You Decide daystar Young Dreamers 18 12-04-2004 11:20 AM
Home Ownership Overated? otako Young Dreamers 59 08-29-2004 12:48 PM

 

 
All times are GMT -6. The time now is 11:17 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.