Is Becoming A Landlord The Best Option?
Let me preface this by saying we live in a part of the country where homes are extremely low priced... Having lived in the big city I recognize many will think we live in a paper box given our mortgage
We have had our house on the market for two months and need to move due to a job requirement that my husband live in the state where he works (which is 25 miles away). Aside from this both houses on either side of ours have turned into rentals and we have neighbors from hell now with no end in sight to that situation.
Our real estate agent does not think anything is going to move very quickly in this market and is urging us to rent our house since this is becoming a rental community. Being landlords is not something we envisioned but she is convinced our house could rent immediately for $650-$700 a month. She says we should have no trouble getting a mortgage through a lender she works with provided we take a signed one year lease showing the incoming income???
Is this worth our effort given these numbers:
Credit scores for spouse and myself around 685 as of today.
Current mortgage $481 with 10 years left on a 15 year mortgage at 5%. Refinanced from a 30 year to a 15 year 5 years ago. At the current asking price we had anticipated $13-15,000 profit after commissions which would have gone toward debts and a down payment.
Credit scores for spouse and I- 685
Limited savings on hand except in 401k(s)
Monthly expenditures (debts) without mortgage - $693 (cc debt, lots of student loans, and car payment)
Monthly income $4000 * spouse works full-time and I am self-employed with the capacity to generate more income than I currently do.
Moving will also cut down on travel expenses to work by $300 per month.
I am hoping someone out there can either back up or tear apart what information we have been given. Our agent states that renting our house is probably our best option for getting out of this neighborhood and into another house.
[ Edited by cerumen on Date 07/21/2008 ]
I had problems w/ tenants and having it listed at the same time.
The refused to have a lock-box
very uncooperative w/open houses and apointments w/ the agent.
You might consider this issues in your mo-mo lease.
With a payment of $481 renting it out at $700 would provide some cash flow, which would help rather than hurt any future loan application. $650 is marginal, but in the long term you may do better having tenants cover your expenses and pay down your mortgage while you wait for the market to improve. My tendency is to agree with your Realtor- while any property will sell eventually, how long might it take? You are better off having the rental income than two mortgages you have to cover from your current income, and any lender will see it this way also.
Chris
If it were me...i would lease it out...when you consider 1) tenants would be paying down your principal at a $200. clip per month...2) the move would save you $300/mo....3) you would cashflow over $200./mo on rent....that totals $700./mo ...a total of $8400.00/ yr. you would be ahead...not counting your depreciation...If you get lucky & have a good tenant for 2 or 3 yrs it would not be a hardship to landlord considering you are only 25 miles away...heck, you only have 10 yrs to go on the mortgage...looks like a great investment to me...plus nothing can stop you from buying another home in the other state
It is making more and more sense when you look at it from those angles.
We were counting on the profits from the sale for DP for our next house but it looks like we could do an FHA and ask the seller to pay closing costs.
We could cover the 3% DP but not closing cost and DP or vise versa.
I think the biggest hurdle is to stop looking at this as our "home" and now see it as an investment and a business.