Quote:
Originally Posted by Eyerishgold
... and have decided to put our townhome up for sale and rent at the same time.
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So all the reading you did here had no educational value? Just kidding. I think.
Your approach works way better as a FSBO/FRBO on Craigslist. There are also MLS services that will list you for a ~$300 fee. And if you're near a military base then you may want to try AHRN.com for rentals.
As for the cash flow issue, spreadsheet your fears with a fairly realistic scenario. Let's say that the market goes into 10-year real estate slump, where home values decline by nearly 40% in the first five years and stay there for the next five. (They'll double in the subsequent seven years, but for now let's just focus on the first decade.) About halfway through that slump, your prospective tenants start comparing rents and jack you up for a 10% rental reduction. Faced with yet another two-month vacancy if they move (for many other landlord's incentives), you reluctantly acquiesce.
You get to depreciate the house on Schedule E because the IRS will tax depreciation recapture on the eventual sale, even if you never depreciated. And of course you get all those great landlord deductions. Don't forget to add in a few months' vacancy every other year or so, and assume that you'll replace every major appliance during the next decade. Add in a roof if it's already 10 years old. Annual carpet cleanings. Annual or bi-ennial tenant moveout cleanings & paintings. Maybe a frozen water pipe or overflowing toilet casualty.
That $200-$300/month negative cashflow doesn't seem like much, but you could also be facing annual losses of $2400-$3600/year for a decade.
If that doesn't seem like a problem then you're ready to landlord.
The above scenario represents the Hawaii real estate market from 1990-2007, including many of our own landlord experiences.