Renting out my old home! First time landlord
New to Real Estate · WEST CHESTER PA · Member since 2021 · 27 posts · 5 votes
Renting out my old home! First time landlord
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Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
3yThat would be my question. Let’s say it’s worth $100k more than you paid for it after selling costs. If you sell now you pay zero taxes. If you rent it out for 4-5 years and then sell, that $100k is subject to 20%+ federal taxes and maybe 10% state taxes. So you pay an extra $30k in taxes.(per $100k) That might eat up more than your rental profits.
You’d be better off selling and then buying a property you really want to rent out.
17 Replies
- Real Estate Agent · Tipp City, OH · Member since 2018 · 65 posts · 35 votes3y
Don't over improve the property, just rehab it to a nice, clean, and safe place to live. Look at other rentals in your area and see what features are standard in your area (stainless appliances, tile showers etc.).
The next thing you'll need is a solid lease. You can find some forms here on BP or you can have a real estate attorney draw one up for you. I would suggest at minimum have an attorney review what you come up with.
Once you have the property clean and ready, take good pictures and advertise it. Facebook marketplace will get a ton of eyes on it. You will want to come up with a list of qualifications, such as minimum accepted credit score, income, and so on. Relay that info to those interested. That way they can prescreen themselves and not waste money on an application (never deny someone from filling out an application). For just staring out, I recommend using apartments.com to handle your applications and screening. It will do a background and credit check on perspective tenants. You can also do your lease and collect payments through their system. It's also free for the landlord to use.
- New to Real Estate · WEST CHESTER PA · Member since 2021 · 27 posts · 5 votes3y
Quote from @Bill B.:
This is not a property with a bunch of currently tax free appreciation you’re about to make taxable, right? (Something you’ve owned for years and is worth a lot more than you paid for it.)
It was my primary residence for about 10 years. I no longer live there and and looking to rent it out.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes3y
That would be my question. Let’s say it’s worth $100k more than you paid for it after selling costs. If you sell now you pay zero taxes. If you rent it out for 4-5 years and then sell, that $100k is subject to 20%+ federal taxes and maybe 10% state taxes. So you pay an extra $30k in taxes.(per $100k) That might eat up more than your rental profits.
You’d be better off selling and then buying a property you really want to rent out.
- New to Real Estate · WEST CHESTER PA · Member since 2021 · 27 posts · 5 votes3y
yes I see. I don't plan on selling this property. My plan was to rent it out . I have about 150K in equity. Once I have a tenant in there I was going to tap some of the equity to roll into another property.
- New to Real Estate · WEST CHESTER PA · Member since 2021 · 27 posts · 5 votes3y
Quote from @Jacob Hornberger:
Don't over improve the property, just rehab it to a nice, clean, and safe place to live. Look at other rentals in your area and see what features are standard in your area (stainless appliances, tile showers etc.).
The next thing you'll need is a solid lease. You can find some forms here on BP or you can have a real estate attorney draw one up for you. I would suggest at minimum have an attorney review what you come up with.
Once you have the property clean and ready, take good pictures and advertise it. Facebook marketplace will get a ton of eyes on it. You will want to come up with a list of qualifications, such as minimum accepted credit score, income, and so on. Relay that info to those interested. That way they can prescreen themselves and not waste money on an application (never deny someone from filling out an application). For just staring out, I recommend using apartments.com to handle your applications and screening. It will do a background and credit check on perspective tenants. You can also do your lease and collect payments through their system. It's also free for the landlord to use.
Thank you for the input. I am getting it cleaned and painted. It is in a very nice area and is very very safe. I will be getting pictures soon and will most certainly use apartments.com. Thanks again
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Scott Rovner:
I am looking to rent out my old home I am in the process of fixing it up and getting it ready. I have no idea how to move forward after it is fixed up. I very much want to find a reliable long term tenant. Any TIPS to help things move along. Thanks in advance
Do yourself a favor: buy "Every Landlord's Legal Guide" by NOLO. Written by attorney investors, it's full of practical advice pertaining to management of investment property, has sample forms that can be edited, and - most importantly - they tell you what your primary state laws are and where you can read them. It's updated every year and is the best $40 you'll spend as a Landlord. There is one book for 49 states and a separate book for California.
The DIY Landlord Book4.7248 Reviews - Rental Property Investor · Worcester, MA · Member since 2018 · 131 posts · 135 votes3y
Quote from @Scott Rovner:
yes I see. I don't plan on selling this property. My plan was to rent it out . I have about 150K in equity. Once I have a tenant in there I was going to tap some of the equity to roll into another property.
I would look into what your cash flow would look like after you pull money out of the deal. If you aren't going to cash flow much I agree with @Bill B., take advantage of the primary residence tax exemption and sell it for all those tax free gains and buy something that will cash flow.
If it will still cash flow well after pulling money out, or if you are for some reason adamant about holding the property then get a good tenant in there with strong rental income to show the bank, then get a cash-out refi or HELOC to pull money out. Some lenders will estimate market rents if you want to pull money out before putting a tenant in, but in my experience the number is usually lower than what you can actually get, so its usually better to do it once the tenant is in place with a lease and payment records to show the bank the exact income.
- San Diego, CA · Member since 2023 · 58 posts · 77 votes3y
I use Avail for lease templates and to post my listings. They also have a payment feature and I think a work order system, but I don't use those. I only have 3 units so I just have my tenants pay/contact me directly, but could be useful for some people.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Scott Rovner:
yes I see. I don't plan on selling this property. My plan was to rent it out . I have about 150K in equity. Once I have a tenant in there I was going to tap some of the equity to roll into another property.
If you don't plan to sell:
1. Get HELOC first
2. Don't use the HELOC
3. Then rent it out - Developer · St. Augustine, FL · Member since 2018 · 311 posts · 384 votes3y
Many good comments here, especially @Nathan Gesner's book recommendation.
Here is what I do for listing my properties:
Clean up and do all necessary repair/maintenance to make sure the property is clean, safe and functional. Tighten up the yard to boost curb appeal. Use a professional photographer to take good pics.
Then advertise it on Zillow, Realtor.com, and Facebook Marketplace. As a real estate agent I also advertise it on the local MLS but I rarely get a tenant from the MLS. Nowadays most tenants come from zillow and its affiliates.
When I get prospect wanting to schedule showings, first I talk to them on the phone and just go over the requirements in the Ad. You can count on most people don't read the description of your Ad so better to have a verbal confirmation before spending time doing the showing. I usually try to group all showings on the same day into one time window, like a mini open house so I'm minimizing my time spent on showing.
I use TurboTenant to screen my tenants. I have tried many third party platforms in the past and in my opinion TurboTenant has been so far the best. I've even tried RentRedi here, still didn't like it compared to TurboTenant.
Reasons:
Clean and simple user interface.
Affordable and effective background check. Their background check seem to be more effective because I get traffic violations as well. I feel many other third party platform who screen tenant background most time come back clean and sometimes in reality, it's not the case. I also check county court cases and see if there's anything open against them. Often I found stuff where the third party platform fails to find. And Turbotenant has been able to match what I find in the county. Not sure why.
The platform prompt the applicants to upload all of their documents. I don't know how does the platform do it so effectively but TurboTenant is the only place I receive all the attachments I want most of the time. Of course, if the applicant deliberately decides to skip uploading documents, then I don't get them. But I would say 90% of the applicants from Turbotenant I automatically receive a copy of their ID, paystubs or bank statement. Not the same case with other platform I've tried, I always have to ask them separately to show proof of what they claimed in the application. Not a deal breaker for me, just a feature that's really nice.
Lease, you can use standardized form from your state. For us, we used our own forms that's been initially drafted by an attorney and continuously tweaked by us over the years. We are very familiar with our state landlord and tenant laws and we review it constantly. And we learn from our past mistakes to improve our lease agreement. We try to set very clear expectations in the lease agreement and spell out responsibilities between landlord and tenants.
As far as payment goes, we use apartment.com for our automatic payment services but now it seems like TurboTenant has one as well and we are trying it out with our upcoming tenant in one of our units. You can also accept cash/check. You need to check your state law about accepting partial rent. For some state, accepting partial rent will reset the eviction process.
Lastly, learn every word and take it to heart about how to handle security deposit based on your state/local laws. Security deposit dispute is the most litigated cases in landlord/tenant court cases. I know a tenant, who moved to a different city, took one of my friends to court for a $300 dispute. My friend ended up winning but just a reminder to be cautious with handling security deposit. Dot your i's and cross your t's on this one particular procedure.
Best of luck to your Landlord journey.
- Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes3y
@Scott Rovner fb marketplace.
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
I list mine on Zillow rental manager for free about a week or two before they’re ready. I usually get over 50 inquiries within 48 hours. Mostly tire kickers, but usually a few really good applicants. They pay the background check on Zillow and it’s all easy to do. You can list up to 10 pics and say whatever you want. Maybe have an open house on a weekend. Then I get all my leases for free on lawdepot.com
I wouldn't rent it out for more than 5 years so you don't get nailed with taxes when you eventually sell. Plan on selling it within 5 years. And I would do a HELOC on it now so you can tap that equity to buy more real estate. Maybe even a cash out refi depending on what you want to do.
- Real Estate Agent · Tampa FL, USA · Member since 2022 · 6 posts · 4 votes3y
Quote from @Scott Rovner:
I am looking to rent out my old home I am in the process of fixing it up and getting it ready. I have no idea how to move forward after it is fixed up. I very much want to find a reliable long term tenant. Any TIPS to help things move along. Thanks in advance
- Real Estate Agent · Tampa FL, USA · Member since 2022 · 6 posts · 4 votes3y
Hi,
We are doing the same thing!
the BiggerPockets website has a resource that shows how a rent out my current house step-by-step. It’s very helpful! - Apopka, FL · Member since 2014 · 57 posts · 4 votes3yYou can do the whole Thing at Zillow? Even collect payments?
Quote from @John Morgan:
I list mine on Zillow rental manager for free about a week or two before they’re ready. I usually get over 50 inquiries within 48 hours. Mostly tire kickers, but usually a few really good applicants. They pay the background check on Zillow and it’s all easy to do. You can list up to 10 pics and say whatever you want. Maybe have an open house on a weekend. Then I get all my leases for free on lawdepot.com
I wouldn't rent it out for more than 5 years so you don't get nailed with taxes when you eventually sell. Plan on selling it within 5 years. And I would do a HELOC on it now so you can tap that equity to buy more real estate. Maybe even a cash out refi depending on what you want to do.
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesYep. I collect payments on my own. But I use Zillow for listing them and doing background checks which the applicant pays for ($29). I rent mine out usually within 24-48 hours on Zillow. It gets a ton of exposure. And it’s free for your first listing. Then $10 after that. Definitely worth the money for me.
Quote from @Logan Larochelle:
You can do the whole Thing at Zillow? Even collect payments?Quote from @John Morgan:
I list mine on Zillow rental manager for free about a week or two before they’re ready. I usually get over 50 inquiries within 48 hours. Mostly tire kickers, but usually a few really good applicants. They pay the background check on Zillow and it’s all easy to do. You can list up to 10 pics and say whatever you want. Maybe have an open house on a weekend. Then I get all my leases for free on lawdepot.com
I wouldn't rent it out for more than 5 years so you don't get nailed with taxes when you eventually sell. Plan on selling it within 5 years. And I would do a HELOC on it now so you can tap that equity to buy more real estate. Maybe even a cash out refi depending on what you want to do.
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