Sell House or Rent It Out?

[donradcliffe]

I've rented out the house for 15 years now, as income and as an anchor to windward. Even with the housing market downturn, I couldn't afford to buy the house now, as it has more than doubled in price.

Tried a property manager for a while, and they got the worst tenants I ever had, and never checked on the property. I now price a little below market, get a good pool of prospective renters, and trust my instincts. Current tenants have been in 6 years, and pay the rent by transferring money to my account--with online banking, I can see within hours whether the rent has been paid. They have a list of tradesmen to call if something goes wrong, and can contact me anytime through Sailmail.

[Reality Check]

Originally Posted by Jolly Roger

I don’t know about other states, but in Florida anyone can become a “property manager,” without licenses or tests of any kind. .

That is not really true....

You must have a real estate license to be a Property Management company or manage other peoples property.

You DO Not have to be licensed to manage property you own or have an ownership interest in.

People working in a Property Management Company do not individually have to have a license but the person that is the broker and oversees the day to day operations does have to be licensed and is responsible for all activities.

It is illegal for a person to have an unlicensed "friend" or "relative" act as property manager for their property for payment, unless that person has a bonified ownership interest in the property. Lots of these get into major trouble when tenant problems come up. Payment has many meanings and the courts have ruled differently many times but any consideration is considered payment.

Typically having a relative or friend oversee your property while your away isn't a problem until a problem occurs, then the s**t hits the proverbial fan. This is a felony in Florida.

[denverd0n]

You've already heard it a dozen times, but the key is a good property manager. The real question is, how do you find a good property manager?

References from other landlords would be a good place to begin. I would also suggest that you start renting the property out (if that is what you choose to do) well before you actually leave the area. That will give you time to go by and check on things regularly, which lets you see how well the property manager is doing at picking tenants and maintaining the place. As others have intimated, keeping in touch with your neighbors is also a good idea, as they can keep you informed both about what the tenants are doing and what the manager is doing.

Personally, I owned rental properties at one time, but they were all within a few blocks of where I lived and so I managed them myself. When I moved away from that area I chose to sell the properties and have not owned rentals since.

[Maren]

Originally Posted by RainDog

I am transitioning from shore side to cruising. I plan on leaving in three years. Since I bought the boat I am spending all my spare time and money on the boat. I live-aboard every weekend, and most of them are long weekends. The longer I do this, the less interest I have in continuing to maintain and live in my house.

Because of this, I have decided I want to move into a studio apartment. I could either sell my house, or keep it and use it as a rental property. It is a new house in a desirable neighborhood for rentals. I would be interested to hear from other people who have faced this dilemma and kept the property as a rental property. What were your experiences?

I agree with just about everything written before.

But, I would consider a few last points.

1) Interest rates. If interest rates start to rise quickly you might do well to sell or plan to keep the house for quite a while. Reason: people can only have so much for a house payment. If interest rates rise after a certain point it depresses home prices for the same reason. Think 1970's.

2) Tax structure. If you plan to sell it in say three years, you will meet the 2/5 rule. So...

3) Comps for the area. If they have taken a hit and you have a justifed reason to believe they will turn around in the short term you would also be smart to wait a bit.

At this point in time I think the advantage is to wait. But watch the taxes and interest rates while you impliment the rental advice.

[David_Old_Jersey]

I would also mention whether the property maintanence requirements make it a suitable rental, by age and design - the more that needs to be fixed the less profit and the more scope for unscrupulous property managers / tradesmen to maximise their income at your expense.....especially when they know you can't check up on them.

Of course sometimes you have what you have and make the best of it / give it a go - just like boats

[Dune]

It makes me good money but ...[/quote]


I am wondering where all the 'bad money' is. The rest of the advice here is spot on.

[bstreep]

I'd also like to reinforce the tax ramifications noted above. If you make money on this property when you sell it, you WILL want to have lived in it 2 of the prior 5 years. So, you don't want to rent it out for over 3 years, and THEN decide to sell it - and don't wait until 2 years and 6 months to sell it!

The Austin market is still pretty decent. There's no way of knowing what it will do in the future, but Austin is one of the most expensive markets in Texas.

[RainDog]

Thank you everyone for all the great information. I would certainly rather rent than sell. I just wanted to see if many people had horror stories. Sounds like the overwhelming agreement is that as long as you approach it as a business and have good partners, it can be worth the trouble. Thanks for the 2/5 information. I was not aware of that and it is certainly very important for my planning.

[S/V Antares]

We have a different perspective as we cruise for the winter months and do not wish to empty out the house. Our area (Annapolis ) has a big turnover of gov and gov services vendors moving into the area. Many wish to look and live for a few months before they buy. I rent out a "room" which really means they have the whole house including the cat. The house is fully furnished so they need not move their stuff untill they find a house. We remove a few items and have a small lockup room (big closet)for the very personal stuff. We have a 6 mo lease.

The neighbors are great with e-mails.

Anyone have an opinion on renting a "Room" vs. "House" with regard to the tax issues?

[BlueSovereign]

My two cents is worth just that ... as is everyone else's opinion ... simply because your financial situation is I suspect is more complex than what was described in your original post.

There are excellent sections in Beth Leonard's book "The Voyager's Handbook", that discusses matters associated with the following things:

• Cost of your yacht (fixed price)
• Cost to get it ready for cruising (almost always costs more than you budgeted for)
• Annual Yacht costs (maintenance & insurance, which increases with time)
• Unplanned capital costs (yes **** will happen!)
• Living/cruising costs (will vary in different parts of the world, and on the life style/standard you plan to live)
• Discretionary costs (health insurance, medical costs, trips home, etc.)

Me personally: I intend to rent my NZ house, gaining a NET $NZ 450/week ($US 285). It's location ensures (even in this current market) consistent value increases, and thus consistent rents. I also have a rental investment property (which includes a 15 metre berth in the backyard) that I can draw another $NZ 325/week ($US 205) from.

Depending on only that passive income ($US 490/week) forces me to live within certain means (a rather modest cruising budget), whilst selling a property allows me to risk over-spending. I also have the option, should I stop cruising, to place my yacht "in my backyard", and continue to live modestly off of the main house's rent.

Every person's situation IS different... may I suggest you analyze your own in more depth.

Best of luck.

William aka 'The PIRATE'

[nautical62]

I have some friends who rent their home out as to fund their cruising/liveaboard life. They built studio apartment above the garage they use when they return which allows them to keep a close eye on the tenants. I think it works for them because they have good connections.

On the other hand, I know someone in town who owns a couple rental homes and has had one very bad tenant. Dealing with that issue and eventually having her evicted was a long process even for someone who was in town. Going several months without rent can make the difference between a steady income and a loss.

My own home is in a great location to rent, but it's not a low maintenance home and has a lot of nice interior woodwork, so I'm not sure it's something that I'd want to rent for those reasons. If I ever take up long-term cruising, I know it won't last forever and eventually, I'll need land based accomodations again. I like the idea and protection of keeping my real estate holding in real estate.

[Cheechako]

If your property is in good condition and you are not already at a loss on it, you should try to keep it. As was posted by Donradcliffe, once you get out of the market, it's hard to get back in nowdays. You need to manage it yourself. I guess I have been lucky with renters , but most stay 5 years or more. Price fairly, select your renters yourself. It's not a matter of "first to apply gets it". OTOH, if you think it is going to be a headache or maintenance problem... maybe get out. I would avoid renting rooms.. unless you can get a good manager you trust....

[cabo_sailor]

We've considered this but we have a very large house and are concerned that cruising is not for us except for short periods, say a few months at a time. The amount of time, work, and money required to get our house ready to rent is basically the same as getting it ready to sell. Obviously we don't want to sell in this market so we are still in a conundrum. Ideally, the market rebounds a bit and then we'll sell no matter what because what we have is too large and too expensive to maintain for just the two of us. My wife rented some homes she had (before we got together) and ended up with them totally trashed and since the tenants had skipped it was all on her. Quote the raven, nevermore. For now, I plan on spending the next year on puttzing on the boat and doing short cruises and then we'll see.

Didn't exactly pick a great time to retire did I???

Rich