Renting out the home I live in to move into a live in flip

4 Replies

Hello all just a quick question on the numbers or this idea my wife and I are playing around with. Right now we own a 3 bedroom 2 bath 1400sqft home in farmington MO. We are thinking about renting it out so we can move into a live in flip. I’m comfortable with the flip numbers but I want to know what you think about renting out our personal home. The numbers are, mortgage $392.87 insurance escrowed in. Electric for out property we budget $400/month usually less than $300/ month. Property tax this year was $875. And then we have a building on our land that is on the same electric bill but has it’s own insurance policy (I’ll explain why in a moment) which is 475/ year or about $37/month. So total bills on this property equal about $905/ month. That second building on our land is a hair salon that my wife runs her business out of. It pays us $140/ week in rent for fair market cost for the building and it’s share of the electric which is about half. On a four week month we get about $560 in rent from her salon. We put the rental money her salon pays us in one account and then we have that account pay us $100/week to pay it’s share of bills. So in a 4 week month $400 of the total $905 is paid by the salon. So now with the explanation out of the way, is $900-950/ month going to be enough rent to make it worth it? Those would be expected rents for a house like ours in this area. Also I’ve already checked our escrowed insurance would drop about $48/month by switching it to an RDP insurance policy. I’m just not sure if I’m thinking of everything when looking at rental income. What percent of the rental payment is supposed to be set aside for repairs? And does anyone have any better ideas on how to make this better?

Hi @Chris Marshall ,

You should also factor in the cost of vacancy, property management, and large expenses (roof, furnace replacement,...) If you can collect 130% of your monthly bills in rent ($900 x 1.3) then I'd say proceed.

$900/month sounds like a bit for the more rural market you're in (judging from Google Maps), but you can always put it on Craigslist and see how much action you get.

@Nathan Platter yeah my real estate agent I always use thinks 900-950 would be good price range to rent my house. And between the rent coming in from my wife’s salon and the house we would be at 175% of what monthly expenses would be for the property. I was thinking of setting aside $100 for each of those, maintenance, vacancy, and larger problems (is that what cap ex is called?).

Off topic, but why so much for electric? We’re all electric and pay about 10 cents per kw or whatever they measure it in. I never have bills that high. Will renters expect that high of utility bills?
Also, living in a flip while working on it is hard on you and possibly your marriage. Just sayin.

@Chris Marshall

Ahhh gotcha, I must have misread and got the 900 from somewhere else. Yeah, as long as the business model is self-sustaining (which it sounds like it would be, also when factoring for larger repair items) Financially, everything seems OK. Always have 3% of the property value set aside for those big repairs and you should good.

@Marian Smith does make a good point, living in a flip is a not easy. Things, like using the family room as your short-term bedroom and washing your dishes in the bathroom, are not uncommon.

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