Newbie Forced Rental

[Acesa Garrard]

Hello All!!!

My name is Ace new to BP as of about a month ago. I have just been offered a new job in Columbus, OH and must move. Sadly I just purchased a home last May for a total purchase price of $81,900. As of today I have decided I would be better off renting instead of selling based on some advice of my Realtor that I would be upside down on the home. 

Below are my current payment info and some info on the home. 

Principal & Interest: 435.95

Hazard Ins: 63.50

Mortgage Ins: 27.67

County Tax: 78.97

Total: 606.09

Next is what I am going to charge for rent:

Total Payment: 609.09

Repairs (5%): 30.46

Vacancy (7%): 42.64

Property Management (10%): 60.91.....maybe

Trash: $25

Monthly Rent: $770 (Tenant pays Water, Electric, Gas)

Home is a 3 bedroom 1 bath with completely renovated with fenced in backyard. Median Avg Rent for area is $789...Using a calculator for my area this was rated as a fair amount. 

Next I will be creating a lease using Ohio Tenant Rights as reference and a move in/move out checklist.

How am I doing so far?? Any adjustments I need to make with the mortgage company or insurance before renting??

[Dawn Anastasi]

@Acesa Garrard  welcome to the site!

Your numbers for a rental look kind of slim and you were factoring your percentages on the PITI, not the rent. Here is what you may want to consider factoring:

PITI: 609.09

Repairs/CapEx (15%): $115.50

Vacancy (8.3%): $63.91

Property Management (10%): $77.00

Trash: $25

Monthly Rent: $770 (Tenant pays Water, Electric, Gas)

Cash flow before reserves:  $58.91

Cash flow after reserves (repairs/vacancy):  $-120.50

Some may say to set your repairs/CapEx reserve to be only 10%, but I like to operate assuming the worst and hoping for the best.

So, if you run into any issues and you only put $58.91 away each month, you'll wind up paying out of pocket.

Can you get the tenant to pay trash?  Can you set the rent any higher than $770 for your area?  If the median rent is $789, can you at least do $790? Even with these numbers you're going to be negative but it will mean going less negative than with your original plan.