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Should I sell or rent out my house

TexasGary

By TexasGary
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TexasGary

TexasGary 849

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I am going to be moving in with a family member and need to either sell or rent out my house.  My initial instinct says to try the rental game and hire a property management company.  I really would like any advice that any of you fine people have to offer.  The house is in Plano just a few miles from the 121 / Tollway corridor.  This would be my first rental property.  Should I transfer the house to a real estate trust?

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Irish Wrist Watch

Irish Wrist Watch 1398

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If the tenant doesn't decide to stop paying. Understand right now you can't evict anyone. If you think about what is going on in cmcl real estate right now, and how that might eventually affect the lending industry, you kinda hafta wonder if the stock market is due for a tumble. What could you do with an extra fifty grand or whatever when it hits bottom and begins to climb back up.

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Johnny Chimpo

Johnny Chimpo 479

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2 hours ago, TexasGary said:

I am going to be moving in with a family member and need to either sell or rent out my house.  My initial instinct says to try the rental game and hire a property management company.  I really would like any advice that any of you fine people have to offer.  The house is in Plano just a few miles from the 121 / Tollway corridor.  This would be my first rental property.  Should I transfer the house to a real estate trust?

Do you own the house? Otherwise you need to make a realistic estimate of what your monthly cash flow will be. If it’s less than 20-30% more than your mortgage I would just sell it and invest it in something that doesn’t have any headaches associated with it. 

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TexasGary

TexasGary 849

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1 hour ago, Johnny Chimpo said:

Do you own the house? Otherwise you need to make a realistic estimate of what your monthly cash flow will be. If it’s less than 20-30% more than your mortgage I would just sell it and invest it in something that doesn’t have any headaches associated with it. 

I own the house but its not paid for if that is what you mean. I estimate I would make around $700 per month over principal, interest, taxes, and insurance.  I didn't think there would be too many headaches if I hired a management company.

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Bernard

Bernard 879

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I rented my house for like five years. Piece of cake. Don’t believe the shit you hear. I maybe got five calls from the tenants in five years. Probably fewer. Checks just showed up in my mailbox every month. Do you have a handyman you trust? If you do, your work load is basically nothing. If not, you can still use you self-management savings to over-pay some retail service providers.

Bernard

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horn4life

horn4life 3783

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5 hours ago, TexasGary said:

I am going to be moving in with a family member and need to either sell or rent out my house.  My initial instinct says to try the rental game and hire a property management company.  I really would like any advice that any of you fine people have to offer.  The house is in Plano just a few miles from the 121 / Tollway corridor.  This would be my first rental property.  Should I transfer the house to a real estate trust?

I would want more of the variables about the why behind the move and your plans for the future.  Are you moving 100 miles away, vs 800 miles?  If you are picky as shit about who you rent to you will be fine.  On the other hand folks are going nuts on the numbers on houses in hot areas because of the super low interest rates. Are you moving in with a family member because of their health or yours?  I only ask because the usual reason for moving in with a family member later in life is for support for somebody. I would also be curious about how many more years on the note.

I would ask a couple questions-

1) Do you need an excuse to visit Plano and deduct the trip? (then rent)

2) Do you think the house is going to go up in value over time? (then rent)

3) Would you ever want to return to this house? (then rent)

IF you want to rent, what you really need are a couple of good trades or a fantastic handyman.  Clear instructions for the tenant on how to take care of the house... like wrapping pipes for example. 😉   The difference in income over time of dealing directly with your tenant rather than a hands off property management arrangement can be a fair amount of money over time.  Depends on if you just want a smaller less hassle return, or the extra cash.  Since you obviously live in Plano now I would ask around and find some people you feel comfortable doing maintenance. Ask a neighbor to keep an eye on things for you, and find a highly qualified renter.

ALTERNATIVELY- to sell -

4) do you have an alternative investment that would make more than the $700 cash flow, taking into account the tax advantages of depreciation and write offs. https://www.investopedia.com/articles/investing/060815/how-rental-property-depreciation-works.asp 

5) Do you just want the cash for the next opportunity or for other personal reasons that make the income flow off a rental not as attractive?

6) hookers and blow... just kidding...

Do the math!!!!  Unless you really need the money my money is on rent. Houses in Plano are appreciating from what I can tell from my quick 2 second search. https://www.redfin.com/city/30868/TX/Plano/housing-market. 

I personally would rent it, and likely sell the property within three years after renting it.  That way I get the couple years of depreciation and cashflow, while at the same time retaining the ability to pay NO TAX on the amount of appreciation of your homestead. ( I am sure there is some recapture from a tax perspective on the depreciation?)  IF, this might be your strategy, you also could do a cash out refinance now to pull some cash out, and push the expense side of the ledger up for the rental with the higher cost basis from the Refi.  (channeling my inner Phil)

Lot of variables... and what do you personally WANT?  Getting $700 a month Possibly nearly tax free) on something that is appreciating is a pretty sweet deal.

 

 

 

 

 

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TexasGary

TexasGary 849

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7 minutes ago, horn4life said:

I would want more of the variables about the why behind the move and your plans for the future.  Are you moving 100 miles away, vs 800 miles?

No, moving about 10 miles north.  It's where Aubrey, Little Elm, Frisco, and Prosper all come together.

  If you are picky as shit about who you rent to you will be fine.  On the other hand folks are going nuts on the numbers on houses in hot areas because of the super low interest rates. Are you moving in with a family member because of their health or yours?  I only ask because the usual reason for moving in with a family member later in life is for support for somebody.

The Momz.  She is about a year away from not being able to live by herself anymore.

I would also be curious about how many more years on the note. 25

I would ask a couple questions-

1) Do you need an excuse to visit Plano and deduct the trip? (then rent) No

2) Do you think the house is going to go up in value over time? (then rent) I suspect it is.  It is 3 miles from all of the businesses that have relocated like Toyota but also the new Grandscape development (Nebraska Furniture Mart). A large value in the house is that it is in the Plano West Senior High zone.  That alone adds 40% to the value in my estimate.

3) Would you ever want to return to this house? (then rent) Possibly

IF you want to rent, what you really need are a couple of good trades or a fantastic handyman.  Clear instructions for the tenant on how to take care of the house... like wrapping pipes for example. 😉   The difference in income over time of dealing directly with your tenant rather than a hands off property management arrangement can be a fair amount of money over time.  Depends on if you just want a smaller less hassle return, or the extra cash.  Since you obviously live in Plano now I would ask around and find some people you feel comfortable doing maintenance. Ask a neighbor to keep an eye on things for you, and find a highly qualified renter.

ALTERNATIVELY- to sell -

4) do you have an alternative investment that would make more than the $700 cash flow, taking into account the tax advantages of depreciation and write offs. https://www.investopedia.com/articles/investing/060815/how-rental-property-depreciation-works.asp 

Other than stocks I wouldn't know what to invest in

5) Do you just want the cash for the next opportunity or for other personal reasons that make the income flow off a rental not as attractive? If I sell it would mainly be for peace of mind.  Just not having any responsibility has a certain freedom in my mind that goes beyond value.

6) hookers and blow... just kidding... I have considered taking the money and Seeking an Arrangement.

Do the math!!!!  Unless you really need the money my money is on rent. Houses in Plano are appreciating from what I can tell from my quick 2 second search. https://www.redfin.com/city/30868/TX/Plano/housing-market. 

I personally would rent it, and likely sell the property within three years after renting it.  That way I get the couple years of depreciation and cashflow, while at the same time retaining the ability to pay NO TAX on the amount of appreciation of your homestead. ( I am sure there is some recapture from a tax perspective on the depreciation?)  IF, this might be your strategy, you also could do a cash out refinance now to pull some cash out, and push the expense side of the ledger up for the rental with the higher cost basis from the Refi.  (channeling my inner Phil)

Lot of variables... and what do you personally WANT?  Getting $700 a month Possibly nearly tax free) on something that is appreciating is a pretty sweet deal.

 

 

 

 

 

Thanks for this write up.  This is outstanding.

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horn4life

horn4life 3783

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The fact you are going to be so close, to me, renting is a no brainer.  You can take gain on the sale of the house tax free today, or anything as long as you have lived in the homestead 2 out of the last 5 years.  

Rent it yourself, and simply have folks fill out applications and pay the application fee.  Since you have never done this before, I might suggest to look at the site https://www.biggerpockets.com/ .  It has some forums and advice that you might find very useful, from a potential Landlord perspective. Lots of great info and links if you di around, and free like most forums.

Most folks are decent, and if you do a good renter screen at a fair rental rice you may find a renter that stays for years, with little hassle.  

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ballrific

ballrific 215

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Couple of other things that have probably been said:

1) do you need the equity/cash for a large purchase or down payment on new home for yourself (wife) in the near future?

2) does the rental need $50,000+ in immediate repairs or coming up in the next couple of years?


I was a yes to both of those a few years back.

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KYHorn

KYHorn 17201

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On 2/25/2021 at 9:17 PM, immamac said:

Yes you should rent your house. No you shouldn't listen to these clowns about renters not paying. 

I do M2M leases and my tenants take care of it like they are moving out each month. It's incredible to rent to people trying to buy houses.

 

Why do you do m2m rather than a year? Obviously them trying to buy a house is part of this, but are there other reasons?

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immamac

immamac 43171

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I do m2m furnished all bills paid because you make a fuckload more cashflow that way in a market like Austin where there is a near 0 chance for you to have an empty house for a month.

You can rent it for 30%, sometimes 40% more m2m and not have to pay the stupid airbnb pillow tax or state str tax (15% combined) and no cleaning fees (big deal)

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KYHorn

KYHorn 17201

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1 hour ago, immamac said:

I do m2m furnished all bills paid because you make a fuckload more cashflow that way in a market like Austin where there is a near 0 chance for you to have an empty house for a month.

You can rent it for 30%, sometimes 40% more m2m and not have to pay the stupid airbnb pillow tax or state str tax (15% combined) and no cleaning fees (big deal)

Got it. Do you list it on airbnb only?

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immamac

immamac 43171

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sublet.com, craigslist, zillow rental manager, and cozy.co 

ZRM and cozy.co syndicate the shit out of it. I don't list on Airbnb unless I do less than 1 month, although I think I could, just at a higher price because they take a huge booking fee.

 

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TexasGary

TexasGary 849

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After some time I have decided that renting is the way to go.  I have been advised that I need to create an LLC and transfer the title to the LLC for liability purposes.  I am reviewing how to create an LLC and have questions.

1) Choosing a Registered Agent - I assume that this is something that I can do.  I see that you can hire companies to fill this role but all the LLC will be is one house.  Am I missing something here?

2) Member managed vs manager managed - I think Member managed is for me since the LLC will just be me.

3) Do I really need an operating agreement?

4) Should I add a family member to the LLC in case something happens to me?

5) Is there any other advise that anyone has?  I have never owned a business before so I am sure I am missing something.

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Buzzrock

Buzzrock 14947

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Good call. We moved two years ago and kept our old place and it just prints money. It’s worth more than double what we paid for it in 2002. We have a couple of trusty handymen who handle everything. It’s a small family who signed a multi year lease and it’s awesome.

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immamac

immamac 43171

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On 5/27/2021 at 5:26 PM, TexasGary said:

After some time I have decided that renting is the way to go.  I have been advised that I need to create an LLC and transfer the title to the LLC for liability purposes.  I am reviewing how to create an LLC and have questions.

1) Choosing a Registered Agent - I assume that this is something that I can do.  I see that you can hire companies to fill this role but all the LLC will be is one house.  Am I missing something here?

2) Member managed vs manager managed - I think Member managed is for me since the LLC will just be me.

3) Do I really need an operating agreement?

4) Should I add a family member to the LLC in case something happens to me?

5) Is there any other advise that anyone has?  I have never owned a business before so I am sure I am missing something.

I wouldn't do this unless you have substantial other assets. This is a huge headache and pain in the ass that really only makes sense once you have many rental properties or a bunch of assets that aren't protected by judgements. 

You do need to get a much different insurance policy with at least a 1M umbrella. 

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TexasGary

TexasGary 849

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2 hours ago, immamac said:

I wouldn't do this unless you have substantial other assets. This is a huge headache and pain in the ass that really only makes sense once you have many rental properties or a bunch of assets that aren't protected by judgements. 

You do need to get a much different insurance policy with at least a 1M umbrella. 

Well that just made it much easier.  Thanks.

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UT_OB1

UT_OB1 2225

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On 4/9/2021 at 9:27 PM, immamac said:

sublet.com, craigslist, zillow rental manager, and cozy.co 

ZRM and cozy.co syndicate the shit out of it. I don't list on Airbnb unless I do less than 1 month, although I think I could, just at a higher price because they take a huge booking fee.

 

Hadn’t heard of sublet.  Will be checking that out. So tired of short term stays.  Rash of shit heads the last 4 weeks.  Doesn’t zillow charge a fee to list a renta now?

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HRSchenker

HRSchenker 2274

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This is probably a good question for @UTPhil2006but I'm in a similar boat. Right now the rental market for a home my size will probably net me $200-300 a month in cash flow. My question is about buying another home while dealing with this current one. Wife and I want to move out of suburbia but I have no idea what the process is like getting a mortgage on a second home while renting out the first one. I could sell the first one and pocket $150k but I'd rather let the property appreciate with the surrounding area and cash in later rather than take it now. Will I have to put down 20% for the new house or something? Higher interest rate? 

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UTPhil2006

UTPhil2006 3817

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If you can carry both notes DTI wise, no issues.  How long have you been renting the house out?   If its been a couple years you can use that rental income towards DTI, if it's been recently you can't utilize it.  But if you can hold both notes then that is irrelevant.  Since your new one would still be your primary residence, you can put down less than 20% (down to 5% for standard conventional, you just would have MI) and again since it's your primary it would be a normal conventional rate.  You can email me and I can run/help out with numbers to see if we can hold both, etc or if you have more in depth questions - pdubord@prodigymbo.com

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UT_OB1

UT_OB1 2225

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2 hours ago, HRSchenker said:

This is probably a good question for @UTPhil2006but I'm in a similar boat. Right now the rental market for a home my size will probably net me $200-300 a month in cash flow. My question is about buying another home while dealing with this current one. Wife and I want to move out of suburbia but I have no idea what the process is like getting a mortgage on a second home while renting out the first one. I could sell the first one and pocket $150k but I'd rather let the property appreciate with the surrounding area and cash in later rather than take it now. Will I have to put down 20% for the new house or something? Higher interest rate? 

You looked in to getting a HELOC to get your down payment on house 2?  

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dlatin

dlatin 328

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Great thread, I think I’ll use this to continue the discussion vs starting a new one. If you’ve been following my PSWPJFUD thread I bought a property a few doors down. It needs a ton of work first then we plan to rent it. Probably long term, there are a couple VRBOs next door. VRBO feels like more work. Based on this thread, an LLC isn’t necessarily. I should work with an agent to find tenants. Do I need to get help with tax prep or is it relatively straight forward?

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CooterBrown

CooterBrown 18032

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This is probably a good question for [mention=530]UTPhil2006[/mention]but I'm in a similar boat. Right now the rental market for a home my size will probably net me $200-300 a month in cash flow. My question is about buying another home while dealing with this current one. Wife and I want to move out of suburbia but I have no idea what the process is like getting a mortgage on a second home while renting out the first one. I could sell the first one and pocket $150k but I'd rather let the property appreciate with the surrounding area and cash in later rather than take it now. Will I have to put down 20% for the new house or something? Higher interest rate? 

Investing that $150K at an 8% return will net you $12000 that first year and will keep going up from there if you reinvest a portion of it. Stick it all in an SP500 index fund and this year’s return was 27% for a $40K profit. All without dealing with renters, repairs, and carrying costs.
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Slacks

Slacks 6869

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On 12/22/2021 at 12:59 PM, HRSchenker said:

This is probably a good question for @UTPhil2006but I'm in a similar boat. Right now the rental market for a home my size will probably net me $200-300 a month in cash flow. My question is about buying another home while dealing with this current one. Wife and I want to move out of suburbia but I have no idea what the process is like getting a mortgage on a second home while renting out the first one. I could sell the first one and pocket $150k but I'd rather let the property appreciate with the surrounding area and cash in later rather than take it now. Will I have to put down 20% for the new house or something? Higher interest rate? 

 

On 12/22/2021 at 1:31 PM, UTPhil2006 said:

If you can carry both notes DTI wise, no issues.  How long have you been renting the house out?   If its been a couple years you can use that rental income towards DTI, if it's been recently you can't utilize it.  But if you can hold both notes then that is irrelevant.  Since your new one would still be your primary residence, you can put down less than 20% (down to 5% for standard conventional, you just would have MI) and again since it's your primary it would be a normal conventional rate.  You can email me and I can run/help out with numbers to see if we can hold both, etc or if you have more in depth questions - pdubord@prodigymbo.com

 

On 12/22/2021 at 3:10 PM, UT_OB1 said:

You looked in to getting a HELOC to get your down payment on house 2?  

 

30 minutes ago, CooterBrown said:


Investing that $150K at an 8% return will net you $12000 that first year and will keep going up from there if you reinvest a portion of it. Stick it all in an SP500 index fund and this year’s return was 27% for a $40K profit. All without dealing with renters, repairs, and carrying costs.

All of the above.

Buy 2nd home with low down payment.

Get 1st home rented.

Refi 1st home and take out some cash.

Put cash on VOO.

Let renters and appreciation take care of first place. Let market return cash.

Thank me later.

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