Should I rent my townhouse?

Question

So, I have a 2 bed 1.5 bath house in a 5 unit townhouse (906 sq ft), 2 carports, with HOA. I got the place at $175k and I'm currently at $158k and my apr is at 3.25% with a mortgage of $976 per month. Insurance is no more than $45 per month. HOA is $98 per month.  The place needs a little bit of renovation (kitchen, floor in all rooms, bathrooms). I'm not sure what the renovation cost would be to set this up for a rental. I do live close by to a school, hospital, grocery store, gas station. Pretty much in a very good location. However, there is a downside to my place.  The entire building will make this unusual humming sound from between the walls.

Ty Coutts · Answer

All good man! Here to help.

Manuel Llanas · Answer

Afraid I won't be able to use any type of loan, anytime soon. I'm in the middle of getting a multiplex with my brother. So this project is at a later time. But, I might try to get some of them done, little at a time. The carpet and counter tops will be my most difficult ones to work on.

Ty Coutts · Answer

Hi Manuel,

It sounds like you have a solid plan in place for addressing the renovation and humming sound issues. Given your situation, you might want to explore refinancing options or a home equity loan to cover the renovation costs. Let me know if you want to discuss! Please feel free to reach out to me directly.

Manuel Llanas · Answer

Thanks guys, I'll look into that. I contacted HOA about that humming sound. But, I doubt they will do anything. I tried contacting them for previous stuff and have been ignored. I know of a guy here, who is a handyman, who can help out with the things he knows and then I can hire a contractor after he completes his tasks.

Obed Calixte · Answer

What has the HOA shared about the humming sound?  Also - Check your HOA governing docs to see who is responsible.

Get bids for what the renovation will cost and determine how you will pay for it if you decide to move forward.

Additional questions to consider:  do you know what your unit will rent for? And will you self-manage or hire a property manager to do so?

Ty Coutts · Answer

Hello, Manuel Llanas, your property has several positive attributes, such as a great location and a low mortgage rate. However, you also face some challenges, including renovation needs and an unusual humming sound. Here's what I would do step-by-step.

1. Get a clear estimate of the renovation costs. This will help you understand the financial investment required to make your property rental-ready.

2. The humming sound you mentioned could be a concern for potential tenants. Consider hiring a professional to check it out to find possible causes.

3. Research comparable rental properties in your area to determine the potential rental income. Websites like Zillow, Rent.com, or local real estate agents can provide insights.

4. Calculate your NOI (Net Operating Income) by subtracting your operating expenses (including mortgage, insurance, HOA, maintenance, and property management fees) from your rental income.

5. Perform a detailed financial analysis to determine the viability of renting out the property. Consider the following:

- renovation cost, monthly expenses, potential rental income, cash flow, return on investment

6. Use this information to form a pros and cons list, and see if it makes sense for your lifestyle. I hope this helps.