My family needs to move to a larger house, but we've decide that perhaps instead of selling our current house, we'd try and be landlords. I was directed here by a coworker, because I'm obviously very new to the idea! I have a lot of questions, but I guess to start, is this a no brainer?
The situation, basically, is this: our current mortgage payment is around 1250 per month. In the current rental market for our home, we know we could get more than that. Low end, 1700 Even though our realtor thinks we may even be able to get closer to 2000 per month.
The downside to the plan is that we would have less cash for a down payment on a new home. The higher payment would offset the cash flow, but we would still have the 2 properties. Seems like a decent plan...what do you think?
Obviously, I don't know much about all of this, so I'd love any input, warnings or guidance anyone has to offer. Thanks!
Welcome Steve. Many landlords start like this (I did).
You'll have the low rate, long term financing in place; you'll know the house well (and its maintenance, as you have literally been there and done that); and a nice aspect (one that is not always the case)--your single family may pencil out or have the potential too....
But still sharpen the pencil and run the numbers as you will see done here on BP in many places or in books on renting out a sf. There are other costs besides the mortgage that can add up be it maintenance and repairs, vacancies, insurance (and switch to landlord policy), or even management (and you should figure something in even if you do it, as your time is valuable).
Without going into all the details (probably any forum post would leave too much out), I would do this (1) read up on being a landlord some more to help you make the decision (but not so much the books on running 50-100 units, but just a book or two on renting out one or two units; (2) sit down and run those numbers hard down the penny taking in every expense and drilling down more on the income (still sounds fuzzy on both the income and expense side); (3) realize tenants will treat your "home" like, well, a rental, so make sure you know view it as a business asset and not a sentimental place.
Best of luck.....
That's how we got started! 7 houses later we make enough in profit from our first 6 to live rent and utility free on our second if we have a good month.
I talk extensively about how we have turned personal into rental on my website. Here's a few food for thoughts.
1) Are you willing to be a landlord?
2) Are you willing to treat this as a business
3) Its a marathon not a sprint
At the end of the day it has been amazing the financial benefits. We self manage all of our houses even those across the counter (we are in 3 states) and the blessing has been amazing.Let me know if you have any questions.
Look forward to seeing you around.