Renting Very High End Real Estate - Advise Needed

[Bryce Davis]

I would like to get everyone's experience renting a very high end property. Currently I live in a 600k house in a high end neighborhood. My wife and I would like to move across town. The mortgage is around 3k a month. We can afford to be without a renter for over a year of course we would not want to. 

I have considered renting the house for 6 months to show evidence of passive income. During the 6 months live at another property. Afterwards start shopping for a third home. My 2nd home is providing 1500.00 a month rental and the mortgage is 400.00

Has anyone ever rented half million dollar homes? What should I expect? I live in a large city therefore there are lots of people that could afford it. I just wonder if people that can afford it would actually rent a home of that scale rather than buy one. 

[David Faulkner]

I've rented half million dollar homes before, but in my market that is a starter home in a decent neighborhood. My experience has been that the cash flow has been not great but the appreciation has been fantastic and the risk has been low because the class of tenant is quality and demand is high (so vacancy has been low and rent increases frequently), which is why it is expensive in the first place. My friends ask me if i feel weird when I get tenants that make more W2 income than me ... I say no, I love it!

One thing that I was also able to work in my favor, I bought my replacement property and turned my old primary into a rental during a down market. Most people have to sell before they buy a replacement, so the sell high and then turn around and buy high, or they may buy low but they have to sell low first. If you decouple the sale and the buy you can buy low and sell high, or better yet, buy low, buy low, buy low ... and never sell. I used this strategy to build myself a nice portfolio of cash flowing single family homes in nice neighborhoods in one of the most expensive RE markets in the US (SoCal).