I fixed up a single family in an upcoming neighborhood recently and have been living in it for a little bit. The plan is to sit on it, rent it out while it gains equity when I move out in a few months. ( I am purchasing another property to settle in)
I never owned a rental and will be land lording for the first time. For a single family house, what problems or situations will I most likely run into? What were some situations novice landlords had renting out their single family for the first time? The property is old (1913) but I updated it mostly (plumbing, HVAC including heat and ac, new ducts new roof, plumbing fixed flooring redone.) Any responses negative or positive are accepted. I can’t wait to see what you all have to say!
Single family home is great for renting because it's a lot easier to put lawn care snow removal etc on the tenant. I'm not sure how much you owe on it but *holding the mortgage could be an option if it's free of debt. Another if you have debt on it you could do a *land contract or possibly *rent option lease. If you set these up right you basically become the bank and you are free of any maintenance whatsoever. Single family homes make it a lot easier to do those kinds of deals because your market audience is much larger with single family. One thing I will say is if you choose traditional renting and it comes time for you to sell the home, use an inflation calculator to make sure you're getting the same purchasing power or more. A lot of people actually lose money on their homes due to inflation and they dont realize it.
Congrats on your first rental property! I had this experience (renting our personal residence) one year ago and we definitely learned a lot. We had lived in it for 6 years so we also have a lot of well-established relationships with the surrounding home owners which has been (mostly) beneficial.
A few questions - what state is the property located in? There are definitely some special considerations there. How long did you live in the home and what type of financing did you use to acquire it? This is especially important if the potential buyer wishes to finance with FHA loan. Will you serve as the property manager, handy man, etc? How are you vetting potential renters? Are you working with an agent to get it leased?
The good/bad/ugly:
1) We had to move in mid-January and, based on the market for the area, were prepared to have to sit on the property for a few months but it was still painful. It rented in late April. Maybe you'll have more control on moving when you know you have a renter or your area doesn't have as much of a seasonal dip.
2) All of our neighbors (who we are still close with) call us the second something seems off. Super helpful if someone extra moved in or they can alert you of lease violations. Less helpful if they are calling to let you know that they leave the garage open sometimes, that there is a gouge in the lawn, the renter is weird, etc.
3) We're fortunate to have a great network of friends that also are tradesmen, real estate agents or have experience in investing in that area to help when things pop up. A bit different consideration if you are able to do it yourself and you will remain close by (we live 8 hours away now). Either way, networking locally with other real estate related folks will be huge.
So far, we've been lucky to find a renter with excellent credit and a willingness (and skill) to fix things himself when he can. The property is cash flowing well enough that it covered the vacancy losses. I am sure they'll buy something and move out when their lease is up but my fingers are crossed that they stay a few years or that we'll be lucky with the next ones as well.
Hi, I purchased with a 10% conventional. The property was in a little bit of distress so FHA was not an option on my part. The property was cheap though and I was fortunate enough to have the seller pay 100% of the closing costs. The mortgage is low enough to have a good monthly cash flow and the property is 90% updated so I'm banking on a profit just from sitting on the equity. As far as managing the property, I would expect to do the most I can myself for I practically updated the house my self.
Congrats Patrick! What kind of rental strategy are you intending to use? I've done both long and short term and found short term to be the better option.
Hi I suppose I would be doing a short term investment as in only a few years of rental? My main goal is to make my money off the appreciation of the property.
@Patrick Crehan I'm a fan of not telling the tenant that you're the owner, but that you manage the property. That way anything can be passed off as "owner's orders."
Hi Dennis. I recently visited Erie Pa and understand why you have probably seen this. Trashed houses and all.. I suppose the apples don’t fall far from the tree
Hi Dennis. I recently visited Erie Pa and understand why you have probably seen this. Trashed houses and all.. I suppose the apples don’t fall far from the tree
I don’t live in Erie and don’t even invest Much there but ok
Hi I suppose I would be doing a short term investment as in only a few years of rental? My main goal is to make my money off the appreciation of the property.
I mean what rental strategy. Long or short. Long meaning 1 year+ lease or short meaning days to 1 month lease. Both have their pros and cons and definitely different expectations.
Ah, I suppose renting long term until the end when I want to sell the property. Then I would switch the lease to a month to month possibly if the tenants are good and they wish to continue to live in the property. Although I will have to research the difference in both of these strategies
Ah, I suppose renting long term until the end when I want to sell the property. Then I would switch the lease to a month to month possibly if the tenants are good and they wish to continue to live in the property. Although I will have to research the difference in both of these strategies
The reason I like short term over long term is because I have eyes and ears on my property constantly and I know it's being taken care of much more than most long term renters do, at least from my experience. Multiple times a month I have my cleaners in there doing a professional cleaning and reporting any issues. I also never worry about collecting rent or rent coming late and my cash flow is much better with short term. Just a few reasons, but yes its worth researching. You need to first see if you're in a market with short term demand and also if there are rules against it. Then you need to find ways to automate the process otherwise it will be more work and maybe not worth the squeeze. Good luck and give me a shout if you need any help.
I would definitely recommend renting the property with a long term lease (1 year +). One of the major reasons for this is that vast majority of renters are looking for a rental that has at least a one year lease.
Keep in mind however, this is dependent upon the area the property is located in. For example, if your property was located in a mountain town or popular city destination, there may be a greater need for short term rentals.
Ultimately, the less turn over that you have the more money that you are going to make. Every time your tenant moves out you will have to cover the costs of cleaning, maintenance/repairs, and re-marketing the property. Vacancy is expensive so you will want to minimize it to the best of your ability.
In terms of keeping your eyes on the property, I would recommend scheduling either bi-annual or quarterly inspections. You should go into the property take photos to document the condition, and create a report from the inspection indicating any maintenance that needs to occur. This is a great way to ensure that your tenant is complying with your lease and that maintenance and repairs are being taken care of.
Congrats on your first rental property! Wishing you the best of luck!