Sell House or Rent It Out?

[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?

[drew.ward]

Well a couple of things:

1. if you somehow lose your boat after a couple of years of cruising, a house may be the only asset you'll have to leverage the purchase of a new boat.

2. If you can rent it for more than the mortgage/insurance/maintenance costs of the house, then it's income that you may otherwise not have while cruising.

3. at the same time, if you can sell it for much more than you owe on it and you're sure you aren't going to want a land based home in the future, then the cash could be really nice to have.

[lorenzo b]

Lots of variables. You need to talk to several financial advisors, they're free to talk to and only start costing when you hand over your assets. A lot depends on your income. Basically they will tell you real estate is a great addition to a balanced portfolio, but if your not in the business, a contractor or agent or someone with a inside advantage, your real estate holdings should not exceed 33% of total. Houses, very much like boats, need yearly attention and depreciate in value, and if your not there to collect the rent and fix the leaks etc you'll have to pay someone else 6 to 10 % of the rent.
That said, I recently sold my home in SF and retired.

[Pblais]

WE have good freinds that actually had a second home and are actually now living aboard too. They kept their home and rent it out. It sort of depnds a lot what you need financially and how to make the logistics work. Some seel it all so they cn finance the trip and roll the dice should they stop.

The reality is few cruise for more than 5 to 7 years many less than 3. You may not be able to tell which group you will fall into. Good friends were out 7 years then spent the last 2 in a slip and sailed the boat one time ehen they changed slips. So that makes 9 years out. They have no home but they do have a storage building. Real life is not just about sailing. Other elements creep in. You can't be like other people if you can't be like yourself.

[Boracay]

I probably tend to hold onto houses a little too long. Wives on the way to being ex excepted.

I've traveled the world a bit and every time I leave I've rented my house.

There are several things that you need to do if you're renting out. The main one is to find a good agent. Ask around, talk to your friends, interview the agent, look at their office. A good agent makes the whole process worthwhile.

Make sure your agent checks the references of prospective tenants very carefully. There should be some kind of database where any renter who bucks the system gets blacklisted.

Second, don't charge too much rent. Houses get damaged when a disgruntled renter moves out, and there are ongoing expenses as an empty house gets relet.

You say the house is in a good area. This is a major plus, especially if you have nosy neighbours who can keep an eye open and let you know if there is a problem.

Rent not being paid is a major red flag. Last time it happened to me the agent and the tenant both went and I sold the house. Not in a good area. Now I have landlord's insurance that should help to cushion the blow if it happens again.

Uppity tenants are another concern. Probably more trouble than they are worth. Good idea to check just how difficult it is to evict in your neck of the woods.

I've never been asked, and now I would not allow pets. Too much damage can happen in too short a time.

And I don't like polished floors. Damage too easily. My current tenant is complaining about the old carpet, and that's the way I like it.

However I do try to fix things, (like broken heaters, hot water systems and toilets) that make life difficult for the tenant, fast. Make sure the roof is in top notch condition before you leave.

You probably have to accept some wear and tear. A good agent will minimize this.

[Ex-Calif]

Just personal opinion but I would do what you propose.

My brother has 2 houses under rental management and they are paying for themselves. He does give up a percentage but all maintenance is managed by the rental company. When one family moved out they advertised, spruced the place up and rented it out again in a month. Even with the bad economy both mortgages are being covered and that is his goal. Because he is close by he has done a couple of jobs himself to save money but they would have managed it for him if he wanted.

With a couple of years to go you have the opportunity to be close by and see how the management company and the rental arrangement works out. This is important for when you get far from the scene.

The only down side in your plan is that the money you spend on a studio is "lost' to you but if your mortgage is covered your cash flow improves.

[captain58sailin]

Now is probably not the best time in the economy to be selling houses. If you do rent it out, you need to be detached about the house and look at it only as an investment. I rented my house out a few years ago, and I will never do it again, it will sit empty first or I will sell it.

[MarkJ]

Is it paid off? As in do you full own it?

When you say its in desirable neighborhood is the renatl market hot?

Then hang onto it!

House prices are at a low level so you should be buying real estate not selling it.

Our rental property is in an excellent location and willnever be a problem to rent out.

We are lucky


Mark

[GeoPowers]

Originally Posted by Boracay

I probably tend to hold onto houses a little too long. Wives on the way to being ex excepted.

I've traveled the world a bit and every time I leave I've rented my house.

There are several things that you need to do if you're renting out. The main one is to find a good agent. Ask around, talk to your friends, interview the agent, look at their office. A good agent makes the whole process worthwhile.

Make sure your agent checks the references of prospective tenants very carefully. There should be some kind of database where any renter who bucks the system gets blacklisted.

Second, don't charge too much rent. Houses get damaged when a disgruntled renter moves out, and there are ongoing expenses as an empty house gets relet.

You say the house is in a good area. This is a major plus, especially if you have nosy neighbours who can keep an eye open and let you know if there is a problem.
...

However I do try to fix things, (like broken heaters, hot water systems and toilets) that make life difficult for the tenant, fast. Make sure the roof is in top notch condition before you leave.

You probably have to accept some wear and tear. A good agent will minimize this.

All great advice. Use a property management group you can rely on, don't get greedy with rent, fix issues FAST (property manager should be aggressive in repairs), never waiver on rent that is due (property manager's job), and know that you will have some issues.

Also, when deciding whether to rent or not, it is really a numbers game. Take the emotion out of it- make up a spreadsheet (PM if you want one of mine). If the numbers work- go for it. If they don't...don't!

[Jolly Roger]

I own a rental management/real estate company in South Orlando, FL. a great area because of Disney et.al. I also own houses in a very desirable town, but which we could probably not sell except at undervalued prices, because foreclosures and short sales have depressed the market. We therefore rent them.
As a professional in the housing business, and also a avid yachtsman, I want to say I have read few threads on this forum which contain so much good sensible advise in reply to a question. There is very little I can add to all these comments, except - don’t be too sure you can sell your house for what you need, even if it is in a ‘good area.’ Generally speaking, better to hang on to real estate and wait for better times.

[svHyLyte]

If one can find a reputable and reliable property management company--given the current state of the economy and depressed housing market, it would seem wise to simply rent the property for the moment. The key is, however, a reputable and reliable property management company. Our nephew had a very bad experience with a property management company that was actually reporting his house vacant while it was occupied and rent was being paid. He only discovered this when one of his neighbors, with whom he had remained in contact, commented about the "awful tenants" in the property in an email. Even with a good rental company, one needs to stay on top of a property to ensure all is well. In his case, in addition to lost rents, an unattended roof leak resulted in over $18K of damage to the property which he finally sold to be done with the worry.

FWIW...

s/v HyLyte

[VERTIGO]

There is not much this forum does not give great advice on!!!

I think another aspect of renting is if the house itself is a good rental property, if it is new, tenants can not only trash it but also hurt the neighborhood as well. I would also ask you if the property could sell for the price you want and maybe use the proceeds to buy a property as a rental instead of turning yours into one. Not all markets are hit the same everywhere.
I pay 10% to my rental company they do a really good and I keep in contact with my neighbors and also gave my #'s and e-mail to 3 others in my neighborhood and asked them to write or call if they ever had an issue with any of my tenants. I did fall victim to a hard houseing market and pray I keep good renters in it. It makes me good money but if I could do it differently I would sell and buy a pure rental property, something made of CONCRETE.

[Reality Check]

As many have previously indicated the key is a good Property Management Company. I know because I am a cruiser with properties and also a Real Estate Broker with Property Management. We however do not accept Property Management from new clients... only those who have had a long term relationship with us so this is not a business contact attempt.

This in not the time to sale unless you really need to and have thought things out as to what is best for your specific short and long term goals.

The present condition of your home should be a key factor in making your decision. How old is the roof, what major systems (Heat/ AC, water heaters, pool etc) are more than 7 years old? What type flooring do you have... bad news if it is carpet... What is the local economy like and based on. It population growing or decreasing and what are the forecast. Being in the Sun Belt is better news than being in the Rust Belt.

How difficult would it be to have a Management Reserve of several thousand dollars held in Escrow? These would be needed for emergency repairs on rental units to preclude potential high cost associated with tenants having to move and additional damage to property by even minor delays in funding. Think roof Tarp...... etc.

I will not be selling my rental units and my primary home will probably be rented either short or long term when I start spending more than 6 months on the boat... hopefully in the next couple of years.

Good luck and let us know how it works out for you

[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. It is therefore safer and more sensible to appoint a registered real estate company, who have a management arm. If there are then any problems of impropriety or jiggery-pokery you have recourse through the State Board of Real Estate Commissions. We would never place our main license in jeopardy, and are therefore very careful to keep owners fully informed, and never dream of letting a place without fully vetting the tenant, and advising the owner of their credentials. The normal monthly management charge is 10% of the rental, but may or may not include such things as paying the mortgage, home owners dues or taxes on behalf of an owner.

[Sailabel]

When we left cruising a couple of years ago, we opted to rent out our house primarily for two reasons: first the property values had dropped and there was a high inventory of houses for sale, and second- we wanted a bit of security in case the cruising lifestyle wasn't for us (or in case of an emergency and we needed to move back ashore). Had a property manager. His advice was that our house was in a 'higher end' neighborhood and the rental costs would weed out the 'riffraff'. He was wrong. On our summer (hurricane season) trip home to visit friends and family, we ended up having to evict the tenants and make some repairs. Our property manager (through a real estate company) wasn't doing his job as well as we liked.

But, we're taking off in 30 days and will lease out the house again. Primarily because of the housing market, but also wanting the security of owning 'dirt', and we have a reliable tenant who will lease the house of at least a year.

Lessons we learned: Have a good property manager that performs full background checks on prospective tenants (our tenants paid the rent, but the sex offender thing and sex in the driveway kinda offended our neighbors). Make sure the neighbors have our e-mail address... it was the next door neighbor who tipped us off that there were issues with the tenants). Several of our neighbors who have rental properties advised us to 'emotionally let go' of our home... but we havent' been able to do that yet. So, we rely on a good property manager and good neighbors.

Steve