Renting former principal residence- first time landlord
Tampa, FL · Member since 2016 · 6 posts · 1 vote
I have purchased a new home and intend to rent my current house. Cash flow will be neutral to slightly positive, but the Tampa market seems to be finally rebounding. My goal is to capture the appreciation that will likely occur over the next few years and accept the limited income (for now). Thoughts.
Congratulations. Thats a big transition, and a good way to look at the process. Yes, the Tampa market is turning around. However dont rely on appreciation alome. Check to see what similar houses are renting for in your area; that way you know where your price point is at. The key is to get a (good) tenant in there that will help pay down your mortgage and put a few dollars into your pocket as well. Much success to your investing career. If you have any questions, feel free to ask.
Thank you for your response. Seems like I'm on the right track.
Lorinf
@Loring Hinds, I am a hands on landlord for 30 years in S. Tampa. My first question would be, "are you out of your mind?" The second is, "what is the address of you property?" Do you know that this is the current top of the Market? Consider this a Seller's Market here in Tampa, depending on the area and the property type you own. Example is that I have a 3/1, 1000 sq. foot house down by Interbay and Manhattan and it just jumped $20,000 in value in the last six months. While my half acre on Dale Mabry near Interbay is still not interesting enough for the builders to make me offers to build. What's the difference? The East side of Dale Mabry from Gandy Blvd. has been the one that all the builders were after as all the areas to tear down and build out from Gandy to Kennedy went sky high in value. Those two story mini, 80% to lot size, mansions that surprised us ten years ago are now even bigger, three story units in an effort to build more square footage to make the 50x100 foot lots pay enough profit to build them out. We just sold a 51x130 lot two blocks South of Kennedy and the builder scrambled to ask for a Variance to make the 7 foot setback that was already moved to 5 foot next door, to 3 FEET with only 5 feet for garden in the back alley access where they build the garage. My lawyer said that the City is letting them have just enough green space on the side to run the lawn mower. The City would not let you do any of these things twenty years ago and now its Wild West for the builders with no, none, nada improvements in the street for sewage, sidewalks with curbing and especially parking and storm drainage. You see what just happened with two foot of rain in Baton Rouge? It does not take a hurricane in S. Tampa to see the same. Everyone moved out of town to all the new developments that were building big homes with garages in the golf course type communities. Gorgeous, but, then they found out that it takes up to two hours to commute back into the City Center to go to work. So, the ones that could began to move back to the South of Kennedy Blvd. and the building boom was on. An agent who offered to buy my Hesperides property told me last week that he has the house a few down from mine that is the West side of Dale Mabry. He has two houses on the East side and down by the AFBase and he says you can't find a vacant lot to build for less than $150,000 on the EAST side. So, that is why the price on the WEST side have jumped so much in the last six months. All those houses were built after WWII to be two and three bedroom, one bath with carport. Everyone wants a 3/2 or a 4/3 which were not built, with a Garage. So, that creates the demand for the builders to satisfy the need for all those who do not want to commute from outside of town to live in S. Tampa and be closer to work. That leaves all the Minimum Wage type people, SOL, because they cannot afford to live near Target and WalMart and Home Depot and all the restaurants and go to work. So, I have single ladies with one child calling me saying that they have pre-approval to Buy while they still can, my 3/1.5 with carport for $130,000 and I have to say no because I have raised the price to $160,000. I have an offer for $158,000 and up to $175,000 with no fixups. Is this enough explanation for you to see that in certain areas of Hillsborough County there is an extreme demand that is not going to last and maybe you should sell, sell, sell and not rent for zero positive Cash Flow. There are only two reasons to buy a house. The first is because you need a place to live. The people that rent from me cannot afford to pay more than $1000 a month. I think the guys on this site, BP, consider those rentals to be class D or worse. But, that is the reality for the majority of the renters in Tampa. The people that can afford to pay $1000 or more are the ones that Buy houses to live in. So, where is your home and how much can you rent it for? If it is under $1000 a month, you will be dealing with the same class of people that I have dealt with for 30 years and I tell you, you don't want to know anything about those people. The second reason to buy a house is to rent it and make Monthly Cash Flow. The idea that property always goes up in value is what I have been writing about since I joined BP. Real Estate Value runs in Cycles and newbies do not know what phase of the Real Estate Cycle we are in where you live and have a property. You cannot count on a property to Appreciate over the long term. That is really hard to believe, but, its hot now in S. Tampa and not so hot in other areas. When I bought duplexes in S. Tampa, I was renting for cheap and still making up to $200 a month in positive Cash Flow and at that time that was enough for me to hire a manager and pay for a handyman. Since the 2008 Crash I have not been able to pay anyone to do anything for me and so I am selling. The only thing I will keep is a paid off residence and one rental. You can sell your Residence for TAX-FREE profits right now if you lived in it for two years. You move into the next home and after two years think about doing that again...there is nothing like tax-free profits. You could work for 30 years in a bad Market and not make anything. Now is the time to sell depending on where your property is at. To rent for zero positive cash is not an option. You don't want to be a landlord and I keep telling BP guys and gals that this is it here in Tampa. Markets go parabolic at the end of the run and not the beginning.
Thank you all to the feedback. A lot to consider with this property. The house I'm thinking of renting is in a gated community in New Tampa 4/3/2 about 2400 sq ft. with a pool. 12 years old. Comp rentals are about $2000-$2200 per month.
@Adrian:
The buy option is something I have thought about. I would appreciate meeting with a local expert.
Forget the appreciation angle and look for cash flow here and now. Draft a good lease and hold your well-screened tenant to it. No stories! Rent paid on time or evict before your property is trashed. Professional renters are looking for you...
@Lorin Hinds, You have a big, beautiful house in New Tampa...with a pool. Rents are calculated at 1% a month, of the sale value. So, your house is only worth $220,000? I don't think so. Sounds like you looked in the paper for rents in New Tampa and if that is all they can get, forget it. There is zero Cash Flow and all I can say is that "tenant" is a dirty word. Way too much risk. Your home could be completely destroyed in one month if the tenant loses their JOB, gets a Divorce or separates and there are drugs. Even First, Last and Security Deposit will not pay for a lot of damage. I just had a fire in the kitchen in the house we just sold and the tenant was a NY cop, has been with me for five years. He wants his deposit back, says the fire was my problem, wasn't going to move out, hired a lawyer to sue me for Harassment, illegally entering his apartment to repair the kitchen, illegal collection practices, wants me to put in new carpets and sign another lease and didn't move until I served him with a Three Day Notice. Come on. The property is being torn down in September. There are times when you can rent a lot more than you can buy with the same money and this sounds like one. People that are attached to their property or can't sell for breakeven or better are going to Airbnb.com to rent for short term to tourists for a lot more money per Day, but, that falls under the Hotel rules and they are strict and don't keep the cash and not declare. If you bought the home, new, 12 years ago and had a 30 Year Mortgage, then you just started to pay down the Principal. You want to rent because you can't sell for a profit, but, what if after the Election the Market takes a dump and your property is worth 10, 20, 30 or more percent less than it is now in this Sellers Market? Want to take a chance? I had a friend from our investment club here in Tampa, who bought a $250,000 Condo with the inside view of the Bay over in St. Pete, just before the 2008 Crash and he said that his mother, who travels all over the world and follows the Real Estate Cycles, warned him to sell at all costs. He lowered the price $10,000 a week until he sold for $150,000 and moved to the Philippines. And you bought your next house before you sold the first one. That is where my girlfriend is at. This month we have to think of a solution like yours and she does not want to rent. So, continue to pay for the Carrying Charges and take a loss. I did install an old tenant for $100 a week to help pay for the Utilities and keep an eye on the place. An empty house is prime for the guys who steal the AC compressor outside and strip out the copper wire and just ruin your thoughts of leaving it empty for any time. Like I keep saying, "houses do not take care of themselves" and the "Pros" do not do any of the heavy lifting, even if they are supposed to "manage" the place for you.
@Loring Hinds I sent you a message
@Tommy F. There's a lot more and recently things are getting worse here in Tampa for the renters.Things like my girlfriend works for the County and they have projected that Utilities are going up 20% a year. She is the accountant and that is what is projected. My tenants all pay $1000 or less a month. The majority of them like me because I personally take care of all repairs as soon as they call me. Some of them wait too long to get me to fix a leak and that makes me mad. But, it started after the 2008 Crash that they were paying the Utilities and not paying the rent. I collect the rents because most some of them don't have cars. If I want the rent, I have to drive down and get it. This thing about, "I'll mail it to you..." never worked. Then, they say, "the checks in the mail and I ain't got nothing to do with it." Can you see a Rental Manager making more than one phone call, for a hundred bucks, to get the tenant that didn't pay by the 5th, to get the rent to him? So, I will bend and take a partial payment if they still have a JOB and that was the problem in 2008. Even the Lawyers lost their JOB's and couldn't pay the rent. It's hot as hades here in Tampa and the last thing the tenant will do is to miss a Light bill and live without AC. The summer light bill here is around $300. Some of my tenants are now paying $400. In five years when they have to pay six or seven hundred, what are they going to do? Wages have not gone up in 18 years! The Utility bills are going up exponentially. How are they going to be able to afford to live on their own? I say, they are not. So, it is time to sell. There are the 3300 new rules that are coming out with Obama Care. One of them deals with the sale of houses. If they are not new, then, there is supposed to be a new Department that has to inspect the sale of each house. You are required to rehab the house, for sale with energy efficient, windows and doors and appliances etc. Since when is the government going to tell me that I can't sell my rental property "as is?" There is no way that I am going to rehab and pay the government to inspect and approve the sale of "my" property, that is a tear down for a build out. Did you see what happened to the poor souls in Baton Rouge? I worked the Oil Field for twenty years and the Corps of Engineers has known, forever, about the Madrid Fault line just South of Chicago. When that earthquake goes, all the land South along the Red River Valley, including most of Louisiana, is going to be under water because the Red River is going to shift and there is no way to stop it. None of those people in Baton Rouge have Flood Insurance. FEMA did almost nothing to help them after Katrina. There were three hurricanes during my time that hit the Mississippi coast. The first one wiped out all the coastal towns. The ones that had Flood, rebuilt. The second one wiped out most of those towns again. The people that could not afford Flood insurance decided to leave. The third one got all the Casinos. There was a Senator who had just built a new home in Bay St. Luis on 20 foot stilts the day before the hurricane came through. There was nothing left but the telephone poles that the house sat on when I drove by. Congress has decided to hush up this problem and the cost of Flood Insurance is projected to start going up 10% a year until the banks take back all the flood zone houses because no one will be able to pay the premiums. There is no way to afford what you have to pay outright to solve the Flood Insurance problem. The government has to make everyone pay something on their Home Owners policies, $100 a year, in order to be able to help out the ones that have these floods from nowhere disasters. In Florida, Lawton Chiles allowed the outgoing Insurance Commissioner, Gallagher, to take us off the National Pool of Home Owners Insurance. We got screwed and now we have to sustain the cost of any hurricane in our State, by ourselves. Gov. Scott set up a fund to promote private companies to provide Home Owners policies because Citizens State Insurance cannot handle anymore policies. The money from that fund went to 14 private "companies" as an incentive to start them off in the business and they went out and bought Condos on the beach, new cars and homes and set themselves up like they were reputable businesses and made stock offerings to raise more money. What a joke. They have nothing in the bank to cover any losses from hurricanes and they constantly try to force us to switch to one of these fly by night phoney's who will declare bankruptcy as soon as the next storm hits. The only thing the Mayor and the Polititians talk about on the one side is to raise taxes. It does not matter what you raise taxes for, where are the people going to get more money to pay for anything else? Food Stamps and Obama phones? Obama came up with the idea that the poor people in the inner Cities need to have what the rich people in the suburbs have, without paying for it. So, they started another government set of rules and an agency to force people who live in nice places like New Tampa and the gated communities that surround us here in Tampa to accept a part of their quiet communities to be built out with "affordable" homes for the poor. For the Socialists, there is no where for you to run and nowhere that they will allow you to hide, in peace, without the misery of others being forced upon you. No one is allowed to have anything more than any other, except if you work for the Government and are considered one of the privileged Elites. The latest tricks here in Tampa with the tenants is that they stay in the house until it is so messed up that they can't even stand to live there. On the way out, they call the Police and Code Enforcement on you for things that they have done to the property. I just Evicted one and she filed Bankruptcy in order to stay for a few months more without paying rent. The Sheriff found out and did me a favor to serve her the day before the Bankruptcy so she had to leave my house this week. I have my old tenant who owes me rent from ten years ago, cleaning up the same house she was Evicted from and when we paint the inside this weekend, I have an offer from someone, without doing any fixups, for more than I am asking. I hope to sell this one this week.
@Loring Hinds do you have significant equity in your home? Have you occupied it as your primary residence for more than 2 years? If so, you may also wish to consider selling the property to take advantage of the tax exemption for profits on a primary residence. Then take some of the proceeds and purchase a nice cashflow positive property.
What was once my principle resident is now rented out and it is the only property I don't make much money at. That's because I bought it prior to the recession and even though it was a HUD home I wouldn't get what I paid for it if I sold it now. This is in Mississippi. I also recently bought a condo in South Lake Tahoe, CA which I probably will just break even on a rental property, but I intend to live there when I retire so I don't care that much.
Doesn't hurt to have a few PALS but you need to offset it with some PIGS as soon as possible.
LOL. Obamacare has nothing to do with housing regulations. As for the free cell phones, that's a good idea, not because it means poor people need to have what rich people have but because without a phone you can't get a job. The measly $30 a month the government pays cell phones they will get back in taxes as these people find jobs. As for food stamps, they've been around forever but let me tell you a little secret. They were originally given out by the Department of Agriculture because they help farmers more than the help the poor. And by the way, most people on food stamps have jobs. You want to cut down on government safety nets, make businesses pay people a living wage. It is Walmart that profits from all these programs. As for evictions, they have always been a pain no matter who is in office. And I wouldn't complain about government spending if you are going to need them to evict your tenants.
@Loring Hinds do you have significant equity in your home? Have you occupied it as your primary residence for more than 2 years? If so, you may also wish to consider selling the property to take advantage of the tax exemption for profits on a primary residence. Then take some of the proceeds and purchase a nice cashflow positive property.
Good point. But you can rent it for awhile first. I believe the rule is you have to have lived in the house for two out of the last five years.
A few more details: I have lived in the current house for several years. Not much equity - my income can handle both notes. The rental idea is based on the tax advantages and some income opportunities. I can refinance and lower payment $400. That would boost income to the point where I would pay myself back for the refi cist in four years.
@Loring Hinds, I can't say it in a way for most people to understand, but, what if this is the top of the Real Estate Market from the bottom that we experienced in the 2008 Crash. Does that say anything to you? You could refi and make that cost back in 4 years and sell before the end of the 5th year when the value of you home could be 10, 20 or more percent less? A bird in the hand is worth two houses in trouble. My girlfriend just told me the payoff amount on the property we just sold near downtown Tampa will leave us with $110,000 profit to split after ten years of me renting the two old farm houses two blocks South of Kennedy Blvd. I have $260,000 in Deductions to use up and my half is tax free. That will be enough to pay off all my current debts and leave me enough to fly out to California and visit my mom and go gold mining at our Club in Happy Camp. I will also be able to yell out to the world, like Dave Ramsey does and say, "I am Debt Free...again." I also am selling my 3/1.5 down by the AFBase for a lot more than I thought I could get a year ago and that will also be tax free as I get to use up my Deductions. Since the Crash in 2008 I have had to work things out on a Daily basis with the only lawyer that I could talk to like a human being, here in Tampa. Every day on the phone and signing papers and going to court and I still have years of work to do with him to get out of this Real Estate mess that the Banksters got us into. It will be wonderful to be able to go to sleep at night and not wake up at 3AM with my brain making up a Honey Do List of repairs to do in the morning. Maybe, I will wait for the next Crash...next year? and look to buy a Trailer Park for Daily Cash Flow that is big enough to install one of my friends there to be my full time manager and handyman?