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    dockon's Avatar
    dockon Posts: 3, Reputation: 1
    New Member
     
    #1

    Feb 25, 2007, 10:27 AM
    Renting a home owned and buying another
    We are in the process of buying a new home to be built in June 07 and will have to mortgage 160k. We currently own a 8 month old home (paid for in cash). However my husband wants to rent this home to pay for the mortgage on the other new home, I say sell, he says rent ! I'd rather sell and be mortgage free in the new home than to rent this house and have a mortgage paid by someone else. Any help or opinions is needed !
    Dr D's Avatar
    Dr D Posts: 698, Reputation: 127
    Senior Member
     
    #2

    Feb 25, 2007, 11:42 AM
    The market in most parts of the country is somehat depressed, so your husband may wish to postpone the sale of your home till it rebounds. You should determine if you have the experience and fortitude to become a landlord. One bad tenant can turn your life into a nightmare and your lovely home to trash. A free and clear rental property does not provide the "leverage" (cash on cash return) that most real estate inversors seek. You might get input from a financial planner to see if an alternate investment would result in a greater rate of return without the agravation and uncertainty of a rental. I wish you the best.
    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
    Uber Member
     
    #3

    Feb 25, 2007, 12:52 PM
    Hello dockon:

    I think you're asking the wrong question. The BIGGER question, in my view, isn't should you have a mortgage or not. Rather you should be asking yourself, do you want to go into the landlord business, or not? In fact, the landlord business is a great deal harder than just collecting a check each month.

    Like any business, if you're a rookie, you'll get eaten alive. That's not to say that the landlord business isn't a good business. It is. It's very good, for those who are willing to go unplug a toilet in the middle of the night... Would you be willing to do that? If so, then rent that sucker out...

    excon

    PS> If you have any doubts about what I'm saying, see the movie starring Michael Keaton about a house he rents in San Francisco. The name is something like Paradise lost... Your movie store will know.

    (edited) I looked it up. It's called Pacific Heights. It's a good movie!
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
    Expert
     
    #4

    Feb 25, 2007, 01:57 PM
    I have a lot of rentals, what do you do when the great tenant loses their job, and it takes you three months to evict them finally and when you do the carpet is ruined in every room, there are holes in the wall and the stove is missing.

    At 3 am when they call that the hot water is not working what do you do

    Rental can be great, but if you do it, I would advice using a rental agency that does all the work, you make less money but don't have to do much.

    Personally I would ask this question, if you had that much money in the bank, would you go out and buy a rental property ? If you would not pay a rental with the money, you don't need a rental.
    landlord advocate's Avatar
    landlord advocate Posts: 283, Reputation: 36
    Full Member
     
    #5

    Feb 27, 2007, 02:40 PM
    I too have been in the rental business a long time. All four of my children have college educations, could easily work within their field but have chosen to be full time landlords. They are all millionaires. With that said, unless you have researched rentals in your area, you are probably not ready to make a decision as to whether to rent or sell. You didn't mention how much you would charge for monthly rent. Have you looked in your local newspaper to see what single family homes are renting for in your area? Would you be willing to settle for that amount? Percentage of return: is it better than what you could get elsewhere? We started buying single family homes for rental. We found that there is a great deal more risk than in owning an apartment building. If the single family home is not rented, all the costs come out of the landlord's pocket. There is very little chance of recouping the lost months.

    If you own an apartment building, it is the amount of earnings that changes from month to month, but the expenses are paid by the money that comes in from the rented apartments. Obviously, we sold all the single family homes and own apartment buildings.

    Have you read the Landlord/Tenant laws for your state? Talked to other landlords? Gone to any association meetings? What kind of competition do you have in your area? Is the amount of monthly rent an amount equal to the average house payment or is it more? I own a management company and a tenant screening service and work with landlords who have full time day jobs. A great deal of them would like to get out of the business. By the time they pay a management company, their profit isn't what they expected. When they try to do everything themselves, it takes up their personal time with midnight calls that the refrigerator has broken, the roof is leaking, the upstairs tenant is loud, the toilet is running, the garage door won't open, the downstairs tenant is parked so the upstairs tenant can't get out of the driveway. Being a landlord is not for the faint of heart. It is a commitment, one that takes time to reverse. You have to really want to be a landlord. If you are not going to take it seriously, you may not be successful at it, and it could cost you dearly. If you do decide to rent the property, screen your tenants carefully. Talk to past landlords, run a credit report, criminal record search, check for eviction records, sex offenders etc. Do the due diligence on any adult that is going to live in your property. Also, be sure to change your insurance over to rental property. It is more expensive than owner occupied, but is a necessity.

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