To Rent or Not To Rent
Hi,
I was told by half of the people on investing websites to sell my property, here in Shallotte, NC, but it is pretty hard to find new stuff here as a $40,000 singlewide with land is now selling for $180,000. Our home / property is vacant but going up in value. I found out that I can get a cash out refinance on it of about $190,000. With this money I can finish the rehab and put a doublewide on my parcel right beside of it. I would have two rentals, side by side. My new cash out mortgage would be $1600.00 per month. I would get $1700.00 per month for the brick home and maybe $1500.00 per month for the doublewide. I would get around $1200.00 per month cash flow for the two properties, according to my calculations, give or take. Taxes and Insurance for the brick home are included in the new mortgage, but not for the double wide.
Many people tell me that I am nuts for trying to become a long term landlord. "It is nothing but a huge headache", They say.
Since it would be easy to sell the home, but hard to buy a flipper at below market value and flip it, I am still stuck as to what to do with it.
How much do you hate to be a landlord? ..... What other options would you do?
If I search for the most evil, meanest eviction attorney in the state and use their paperwork and rental agreements, would this help me at all?
One of the property management companies here has in their rental agreement that they must do a pest / maintenance inspection of the property every 90 days so they can check for water leaks, pests, drugs, cats, dogs, change HVAC filters, check for extra people living in the home, etc. ..... It seems like a pretty smart idea.
The home in question is worth about $300,000. If we sell now we do not have to pay $26,000 capital gains tax. If we wait until the end of the year will will lose it.
#2 General Landlording & Rental Properties Contributor
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#2 General Landlording & Rental Properties Contributor
Where do you want to be in 5 years or 10 years? If you plan on holding on to the property for 5 years, that $1200 a month is $72K. You will have some expenses. The value of the homes should also increase. Factor that in when you think about the capital gains aspect (which is also important). Down the road if the two homes are on separate lots, you can also sell them separately.
Being a landlord can be challenging when things go wrong. The type of tenant you get often depends on the home- a well kept home and good screening, you can usually get a good tenant. If it was me, I'd go ahead with your plan of having two rentals. Keep in mind most of us here will be biased as we are landlords. Also when asking friends-if they don't have rentals, they may not know everything that is involved.
#5 All Forums Contributor
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- West Valley Phoenix
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#5 All Forums Contributor
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Being a landlord can be both tough and rewarding. Generally just tough. Are you able to STR this property? Or maybe sell it and transfer over to another type of property....
#2 Managing Your Property Contributor
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#2 Managing Your Property Contributor
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How many of the people "on investing websites" are actually investors and/or landlords vs how many have ZERO actual experience?
Don't take real estate investment advice from someone that hasn't invested in real estate. Even if they have, take it with a grain of salt because their failure may have been 100% their fault.
The NYTimes published results from a study on wealth makers. The results were not what were expected. The truly wealthy OWN...they OWN their businesses -not the sexy kind like start-up tech, fine dining/bars, media influencer - but the boring kind like auto repair, gas stations, equipment contractors. Auto dealership owners were among the wealthiest because of protected monopoly status in their communities. Having shared this, investing in real estate is nothing less than running a business. If you plan on just slapping up a MH and walking away, just buy a CD instead. But if you're in this to build and preserve wealth, then you'll need to move forward with a business mindset and manage your business. Being a landlord is no more of a challenge than running any other business as long as you run it as such. I have a long history at this and I find that those you aren't successful at it simply don't know how to do it. I find it challenging and rewarding and for someone like me who gets bored easily and likes a challenge that has a great return for taking it on, owning a real estate investment business is a great fit.
I recommend that you keep your circle very small and not share your plans with people who don't have a clue and/or don't want you to be anymore than you already are. Unfortunately there's a lot of those folks out there so don't invite in the noise. Again, decide if you want to start, own, and manage a business.
Best...
Thanks Everyone..... I really appreciate your help and comments.... It gives me a lot to think about. :)
@Mike Lynch I have a little different angle than the responses so far. One of the great benefits of owning rental properties is the long term appreciation. I believe the Dave Ramsey saying "The only way a manufactured home appreciates over the long run is if it's sitting on gold or oil".
So, I would recommend against using a MH as a long term rental.
After the first few years, I never found self PM to be difficult, especially compared to a W2 job. Learn to select good tenants, build a network of trusted professionals and skilled trades, build efficient processes, don't avoid difficult decisions. I probably spend 10 hours a month managing 25 SFH rentals. I don't have to worry about a professional PM doing shoddy maintenance or selecting a tenant that changes their Street Glide oil in my living room. Rental income funds the business and cash flows life. Appreciation builds generational wealth.
Thanks Guys for your comments and feedback.... I really appreciate it.
Hey Mike, I know I'm a little late to the replies... I would seriously consider renting vs selling. My circle of friends also told me about the horror stories and why it was a terrible decision to buy rental properties. But none of them had ever owned rentals... Most of them where renters themselves!
So as stated in other replies, if you're going to treat it as a real business, it will work for you. I do not do my own property management, you can if you like. However I personally do all my own repairs and rehabs... most don't. So this business can be as involved (or not) as you want it to be. Want to get your hands dirty? You can. Don't want to? You don't have to. Find the right team to help you manage, repair, etc... and you can have a very easy experience. I'm in the process of buying on my 5th rental, closing next month and I'm loving the fact that I decided to do it. Wish I would have done it sooner!
You're by the coast, have you considered short-term rentals like it was mentioned earlier in the thread? You may want to look into it... If you decided to go that route I would be interested in the possibility of co-hosting w/ you or perhaps even being your tenant... you never know!
Hey Mike,
personally I am not a big fan of mobile homes, they don't last as long and are hard to get financing on if you go to sell it later. Also historically they depreciate, but the land under them appreciates. I would look into possibly building a detached ADU with that cash out refi money. You could potentially subdivide them later and sell them separately or get separate loans on them. Just my two cents, for what it's worth. Good luck!