Land Lords: I need your advice

[z1ggy]

Long story short, I have my house on the market, but it's not selling. Showing after showing people are just not interested. I really need to move out ASAP for personal reasons that don't really matter much for this context. I'm considering renting it out.

Anything tips or stories you'd care to share with me? My plan is to rent to only coworkers (my company is quite large) or Navy folks (live near a large base). I have a large list of concerns and I'm a little hesitant about putting it up for rent.

 

[Scarpozzi]

Why is it not selling? Check the comps in your area, consider moving your stuff out and staging...consider reducing your asking price to get an offer. (I know that sucks, but sometimes that's what it takes)

Btw...I don't recommend renting it out because it could be damaged and basically becomes a second job. If you do go that route, check into hiring a real estate management firm to handle keeping it rented, maintenance, etc...many will charge around 10-12% the rent price for those services.

 

[z1ggy]

Why is it not selling? Check the comps in your area, consider moving your stuff out and staging...consider reducing your asking price to get an offer. (I know that sucks, but sometimes that's what it takes)

Btw...I don't recommend renting it out because it could be damaged and basically becomes a second job. If you do go that route, check into hiring a real estate management firm to handle keeping it rented, maintenance, etc...many will charge around 10-12% the rent price for those services.

It's not selling because of 1 major reason I think:

-Comps
I'm getting totally boned by what's gotten sold around me in the last few months. I have a very nice 2 bed 1 bath house, and I'm asking $163k. A house recently closed that's a 2bed 1bath for $140k. Everybody is saying I'm over priced. I can't sell it for less than $160k though, otherwise I will end up owing money out of pocket. I honestly would probably pay up to $2-3k out of pocket just to be done with it though.

And what you suggested is a great idea, but I simply can't afford that. It's been almost 5 months of it on the market with nobody even coming close to entertaining me with an offer. I can't afford to stage the house for months at a time, while paying the mortgage and paying rent for a new place to live. I've reduced price 2 times already actually.

And yes I already have a place in mind. They charge 10%. Based on local rental properties, with that 10% accounted for, I'd likely lose money on a monthly basis.

 

[cabri]

So you are in the hole for 20-25K

As you realize you have 3 choices.
Stay
Sell
Rent

Sell seems to be out of the picture.
Renting it to people that you know is best.
As second option w/ respect to the Navy is to offer it to the Navy as a lease for off base housing. (this will depend on the market)
If you desire to rent it to Navy people; try to get leased to a junior officer or at least a Petty Officer rank.

Such will be more responsible.

 

[Greenman]

It's not selling because of 1 major reason I think:

-Comps
I'm getting totally boned by what's gotten sold around me in the last few months. I have a very nice 2 bed 1 bath house, and I'm asking $163k. A house recently closed that's a 2bed 1bath for $140k. Everybody is saying I'm over priced. I can't sell it for less than $160k though, otherwise I will end up owing money out of pocket. I honestly would probably pay up to $2-3k out of pocket just to be done with it though.

And what you suggested is a great idea, but I simply can't afford that. It's been almost 5 months of it on the market with nobody even coming close to entertaining me with an offer. I can't afford to stage the house for months at a time, while paying the mortgage and paying rent for a new place to live. I've reduced price 2 times already actually.

And yes I already have a place in mind. They charge 10%. Based on local rental properties, with that 10% accounted for, I'd likely lose money on a monthly basis.

You're not going to get $20k over market value unless your place has some unique and valuable features. Your realtor should have known this from day one.
The one option no one has mentioned is a short sale, you might ask your lender about it.

 

[z1ggy]

So you are in the hole for 20-25K

As you realize you have 3 choices.
Stay
Sell
Rent

Sell seems to be out of the picture.
Renting it to people that you know is best.
As second option w/ respect to the Navy is to offer it to the Navy as a lease for off base housing. (this will depend on the market)
If you desire to rent it to Navy people; try to get leased to a junior officer or at least a Petty Officer rank.

Such will be more responsible.

Will keep this in mind. Who would I start to get a hold of?

You're not going to get $20k over market value unless your place has some unique and valuable features. Your realtor should have known this from day one.
The one option no one has mentioned is a short sale, you might ask your lender about it.

It could be though that the house that sold for $140, was sold for under market value due to it having significant problems. A 3bed 2bath house right down the street from me sold recently for $160k. It had major septic issues, and I believe the tank actually needed to be replaced or the system in general needed major work. My house is basically 100% ready to live in, newer roof, newer siding, newer windows, etc. It also has a finished basement.

Short sale seems unlikely in this case, but I honestly don't know what goes into the decision by the bank. I just assumed they would only grant a short sale if say you had recently lost a job and are trying to move and the market in your area happened to quickly devalue.

I currently owe about $151k on the house.

 

[NutBucket]

Then it's not a comp given it has "significant" issues. A $20k difference for a move-in ready home is cheap. Are there any recent sales that are in similar condition to yours?

 

[purbeast0]

OP sounds like you are a bit out of touch of reality with the value of your home. simple fact of the matter is if it's not selling for the asking price, it's overpriced.

 

[BTRY B 529th FA BN]

There are fees with the city in some areas for having a rental. My city it's 150$ per unit. Then you have to think about the things that are going wrong with the house, including appliances which can run a fortune in some cases. Repairs and replacements area always big ticket items e.g. roof, driveway, garage, walls in basement if there are leaks.., furnaces, etc.

You'll have to make sure things like that are in tip top shape before renting. Renting can be lucrative but the repairs can ruin the positive cash flow.

 

[mizzou]

If you are moving far away, consider using an agency to manage your house for you. They charge a variety of fees.


EDIT;: I see that was covered.

Well if it matters any, I lost 20% in my home value when I sold. Sometimes you just got a crap deal and have to make due.

 

[z1ggy]

OP sounds like you are a bit out of touch of reality with the value of your home. simple fact of the matter is if it's not selling for the asking price, it's overpriced.

Not exactly sure how I'm out of touch with reality. I realize that it's probably over priced compared to what's sold around me in the recent months. But as I stated, I have a break even point, and that's that. This thread is asking for advice about renting and being a land lord. Do you have any advice to offer?

There are fees with the city in some areas for having a rental. My city it's 150$ per unit. Then you have to think about the things that are going wrong with the house, including appliances which can run a fortune in some cases. Repairs and replacements area always big ticket items e.g. roof, driveway, garage, walls in basement if there are leaks.., furnaces, etc.

You'll have to make sure things like that are in tip top shape before renting. Renting can be lucrative but the repairs can ruin the positive cash flow.

I will look into that fee, thank you. Luckily, the major things are all fairly new. Only thing that could probably go randomly is my oil tank. I currently have about $10,000 is savings set aside for home repairs.

If you are moving far away, consider using an agency to manage your house for you. They charge a variety of fees.


EDIT;: I see that was covered.

Well if it matters any, I lost 20% in my home value when I sold. Sometimes you just got a crap deal and have to make due.

Yeah that sucks. Thing is, the market in my area has basically stayed totally flat, and I get eaten up by fees and other things. I'm trying to find a job out of state, and I won't just take a new job before I either sell this house or have it rented.

 

[gururu2]

Renting can be a disaster or a blessing. Before I put anything for rent, I make sure it is as tip-top as my handyman skills permit. Then I take a billion pictures of every corner. Understand that after 1 year rental, costs like carpet cleaning to carpet replacement and wall repair/painting must usually be covered by the landlord (to an extent based on legally recognized wear and tear). Also, most repairs due to a very anxious tenant can range between 200-400 dollars maybe 1-2x a year. If you are handy and nearby you can reduce this to about 50% cost. Otherwise just dial in to a local service (I only do shops with top reviews).

My best friend had a Korean family tenant, father skipped town to South Korea leaving family penniless. Took 3 months to evict. My brother had a widow and family rent his house and they flat out stopped paying. Again, 3 months to kick out. The bad stories are abundant and inevitable. So far so good my tenants have been stable (3 years)...

Zillow has a good rent posting service with quick hits (postlets). Postlets will also push to Craigslist if you like. Check the credit records (have them pay for it through Transunion Smartmove) and look at paystubs. If you get a good solid renter, it is a financial dream.

 

[z1ggy]

Renting can be a disaster or a blessing. Before I put anything for rent, I make sure it is as tip-top as my handyman skills permit. Then I take a billion pictures of every corner. Understand that after 1 year rental, costs like carpet cleaning to carpet replacement and wall repair/painting must usually be covered by the landlord (to an extent based on legally recognized wear and tear). Also, most repairs due to a very anxious tenant can range between 200-400 dollars maybe 1-2x a year. If you are handy and nearby you can reduce this to about 50% cost. Otherwise just dial in to a local service (I only do shops with top reviews).

My best friend had a Korean family tenant, father skipped town to South Korea leaving family penniless. Took 3 months to evict. My brother had a widow and family rent his house and they flat out stopped paying. Again, 3 months to kick out. The bad stories are abundant and inevitable. So far so good my tenants have been stable (3 years)...

Zillow has a good rent posting service with quick hits (postlets). Postlets will also push to Craigslist if you like. Check the credit records (have them pay for it through Transunion Smartmove) and look at paystubs. If you get a good solid renter, it is a financial dream.

Thank you, very helpful.

I would assume that if the family wasn't crazy on the carpet (and I allow no pets) I wouldn't have to replace the rugs too often? I got quoted a carpet job recently for about ~600sqft, and it was $1500 for material & labor.

As I said, I would only rent to stable coworkers (whom I know make good money) or Navy personnel.

 

[slag]

It's not selling because of 1 major reason I think:

-Comps
I'm getting totally boned by what's gotten sold around me in the last few months. I have a very nice 2 bed 1 bath house, and I'm asking $163k. A house recently closed that's a 2bed 1bath for $140k. Everybody is saying I'm over priced. I can't sell it for less than $160k though, otherwise I will end up owing money out of pocket. I honestly would probably pay up to $2-3k out of pocket just to be done with it though.

And what you suggested is a great idea, but I simply can't afford that. It's been almost 5 months of it on the market with nobody even coming close to entertaining me with an offer. I can't afford to stage the house for months at a time, while paying the mortgage and paying rent for a new place to live. I've reduced price 2 times already actually.

And yes I already have a place in mind. They charge 10%. Based on local rental properties, with that 10% accounted for, I'd likely lose money on a monthly basis.

If you can't price your home with what comps are in the area because you'd have to bring money to the table, then you shouldn't be trying to sell your home. If you want it sold, you need to price it accordingly.

 

[z1ggy]

If you can't price your home with what comps are in the area because you'd have to bring money to the table, then you shouldn't be trying to sell your home. If you want it sold, you need to price it accordingly.

So, hence this thread... Advice how to rent.

I'm looking for new work in another state. If I can't sell it, then I need to rent it.

 

[z1ggy]

Well, my contract with my realtor runs out tomorrow. I either have to renew for 6 more months (keep house on market), not renew and take house off and do nothing, or find somebody to help me rent the property.

I'm trying to come up with an effective pro and con list to try and properly assess risk. I'm having trouble coming up with things other than, "stuff may break and I have to pay for it" type of thing. The pros in this case are more intangible since I won't be making any money off of rent.

 

[cabri]

While you may not be making off of rent; you can at least write off ALL expenses related to the property.

Presently, you have only taxes and interest that are written off on taxes.

If the rent can cover 3/4 or more of the house payment; write offs will allow a break even.

Have you investigated the options on renting that were provided previously within the thread?

 

[z1ggy]

While you may not be making off of rent; you can at least write off ALL expenses related to the property.

Presently, you have only taxes and interest that are written off on taxes.

If the rent can cover 3/4 or more of the house payment; write offs will allow a break even.

Have you investigated the options on renting that were provided previously within the thread?

Yes I'd likely be able to cover about 90% of the house payment through rent. I have not gotten a hold of anybody through that Navy website yet due to my busy schedule. I actually had a showing yesterday so I was waiting for that to finish up before I started making any real moves.

I think my #1 biggest concern is actually selling the house again in the future. The #1 comment buyers made were that the house is too small for them. I'd hate to have to pay for months of house payments while it sits empty. I feel like if I rent it, I'd be committing to renting it out for the remainder of its mortgage (25 more years).

I guess there's always a small chance I got a real shitty tenant who doesn't pay rent on time or breaks things, but I think by renting to only people from my company or Navy, I lower that risk significantly.

 

[gururu2]

If you do rent to a sailor, make sure you get that sailors commanding officers contact information. If they cause trouble, the Command can help you out a lot by putting pressure on the sailor.
Also have in mind too that in general military might have a right to breach a rental contract if they get deployed or relocated by orders.

 

[PhIlLy ChEeSe]

Burn it for the insurance!

 

[paperfist]

If you rent it out get an iron clad agreement put together an vet the hell our of potential renters!

Most renters have the mindset that it's not their house so who cares if my kids hang from the refrigerator handle or shot their paint ball gun at the ceiling.

 

[Zalez]

Here is what I would do:

First, check rental comps for the area. Make sure you can hopefully cover most if not all of the mortgage.

Next, make sure the mortgage company allows for the property to be rented. A lot of mortgage companies have a clause stating the property must be primary residence.

Then talk to an accountant. I would set up an LLC to keep taxes separate from personal and any repair costs would be a write-off.

Then hire an lawyer to write up a lease agreement.

Then keep what ever you have in savings there. You will most likely need it.

I've been down this road and it was a lot of work. I would not recommend it if you are moving out of state (or out of town). Chances are, you will just be digging the house debt in to a bigger hole.

 

[Thump553]

What Zalez posted above makes a lot of sense. You will be what is known in the business as an involuntary landlord. Vet your prospective tenants as closely as you can without violating the law. If you rent to active duty military there are special rules that apply. BTW in every jurisdiction I have been in there is absolutely no such thing as an ironclad residential lease-housing court is biased to protect the tenants.

Competent local legal advise is a necessity.

Sounds to me like you have to make a decision between losing a lot of money fast (short sale or foreclosure) versus (hopefully) losing money slowly over the long term in the hopes that property values will bounce back. The wrong tenant and you will be losing a lot of money there too as well.

I've also gone this route. Everything worked out almost perfectly for me, but in retrospect I should have just sold the place for a loss when I moved. And I had the advantage of being a lawyer, having local lawyers on call if need be and renting to a person I knew very well.

 

[z1ggy]

Thanks for the replies guys.

I'm actually meeting with 2 new realtors this week to reassess my situation. Honestly, at a high level, the only advantage I see to renting my house out is not having to pay a huge amount out of pocket right now. I could end up still owing a bunch later if the market slides down again, and then I'd actually be in a worse position.

 

[z1ggy]

OK so met with the Realtors - they both gave me different advice.

Realtor one was a younger guy. He didn't seem to care too much about the condition of the house and overall after meeting with the 2nd realtor, I got the impression he didn't really want the sale. He walked around a bit, asked a few questions, told me about what he'd do for me, then left. On the whole, he said I shouldn't expect to sell for more than the mid 150's.

Realtor two was a lady in her 30's, maybe early 40's. She hung out for almost 90 mins, walking around every single room and giving me advice on how to make it more appealing to buyers. She walked around the entire outside, doing the same. She was going to do an independent market analysis on my home and get back to me with a value of my property. She seemed a lot more interested in the home, but didn't really tell me how she'd do anything different than my last realtor. However, I have to meet with her one more time to finalize things.

At this point, if she comes back saying my home is worth less than the mid 150's, I don't think I'm going to relist. I will spruce up the home (over 2 pages worth of advice on things to do) and relist with her once winter is over. My wallet can't stomach more than a few thousand dollar loss at this time.