Will this even work???

Question

Hey everyone. I'm a newbie and trying to figure out whether I can reasonably move out and rent out the home I live in right now or whether I'd be better off selling it for (according to Zillow) about $35k in appreciation and pouring that into another investment down the line. Here are my two scenarios:

House: 4/2/2 - 8 yrs old - 1476sqft - Central Florida home

Scenario A - Move out and rent to one person/family

• Rent is based on Zillow and Rentometer
• The vacancy rate in my area is actually closer to 5%, but I'm factoring in some buffer for my newbie incompetence. 
• I'm not sure at all what kind of cost I'd be running for property insurance, so this is a very broad estimate (estimating 50% higher than my owner-occupant insurance). 
• Repairs and Maintenance estimate is low but the home is only 8 yrs old and I plan to have about 10K in reserve for any sizable expenses that may come up. 
• Not sure about where my taxes would be

Scenario 2 - Rent the rooms individually to 4 people

• Rent is based on my current house hacking experience (3 rooms at $550) and estimating Master bed/bath at $650. Not sure if Master bed/bath is worth an extra $100, so I'd be happy to hear your thoughts on that.
• Again 8% vacancy
• Estimating utilities (Water/Elec/Internet) at $400. This will be lower in the winter months, but I'm not counting that here.
• Lawn care (Other) at $150
• Again, not sure about taxes

If numbers with scenario 1 are reasonably accurate then that's a non-starter. I'd have to sell. Scenario 2 might work and at present my average room-renter stays for about 6mo and the work of finding a new tenant hasnt been too arduous.

Anyone have experience with renting rooms like suites, as described? Have different thoughts about all this entirely? Think I'm an idiot? I would really be eager to hear what you all think of my situation and these 2 scenarios, as well as any critique or criticisms you may have about my approach.

Thanks!

Brett Rhine · Answer

Thanks @Brandon Reed for the resource

Brandon Reed · Answer

@Brett Rhine I've found a lot of success using airdna.co

They have paid plans which are pretty costly but I've found pretty good luck finding the high-level info I needed by using the data that is available for free. They focus exclusively on AirBnB data though. However, that's a pretty good litmus test for the appetite for STR in the area.

Brett Rhine · Answer

Very true. Though a friend of mine who owns about 20 properties has built his company on the "roommate" model. I can definitely see your point of view, though. I'll need to ask my friend what he's done to mitigate the negatives that roommating your units can lead to.

Chinmay J. · Answer

Same difference what happens at work when the big boss is in the building, vs big boss is on vacation. Without any supervision, you are largely at the mercy of the people being nice to each other and getting along. You might get lucky and find good people, or can be a total nightmare.

Brett Rhine · Answer

@Brandon Reed I'm not familiar with the STR market in my area. Can you point me to where I can do some self-educating?

Thanks!

Brett Rhine · Answer

@Chinmay J. You're right, I did show yearly insurance instead of monthly. Pretax CF for Scenario A is now $262. Scenario B is now $585

I've had a good experience in house hacking over the last 18 months, but I'm sure experience is much different when you arent living on the premises. Can you tell me a little bit more about why that might be such a nightmare?

Brandon Reed · Answer

If you have the time to manage it (or the space in your margin to afford a PM) you could run this thing as a Short Term Rental. That to me seems much more promising to me if you are going to be renting 4 rooms individually. How is your area for STR?

Andrew B. · Answer

I must admit I did not look at your spreadsheets, but you based your value on Zillow. that is never a good idea as zestimates are off by a fair margin. you can use Zillow listings and recent comps to estimate your value.

why are you moving out though? have you considered just staying in one room, and renting out the other 3?

Chinmay J. · Answer

Looks like your spreadsheet is showing yearly insurance where you should be putting in monthly insurance. Even with that, the numbers don't look great at all. Renting rooms individually is a nightmare. I would never advise anyone to do that.

If you are making profit sell it, or consider AirBnB if that's an option for you.