My 6 year renters are moving

[The Home 6]

And they are moving in 3 weeks.   We owe around $188K on the house, just refi'ed to 3.5%. From looking around the internet, a decent estimate on what the house is worth is $150K. (We haven't seen the house since it's been rented. Big Sarge and I are going to go up over Labor Day and see what it looks like.)

To sell would wipe out our CD and short term savings. Not ideal, but would free up the money we pay to the mortgage every month and hopefully we could replenish quickly.

We could also find a property manager and rent it out to someone else. We could reasonably get $250 more per month in rent than what our previous tenants were paying. But property manager fees would cut into this. 

I don't know...this is all happening too fast.

[skubikky]

This is the downside to being a landlord.

If you can continue to rent it out and it still makes fiscal sense, do it.
It's a business, treat it that way.
Getting a property manager is a good move.

[zibazinski]

6 years? You've got a ton of expenses and work to do anyway either way. Unload it. Between fixing it up for sale and selling it at a loss, on paper anyway, you'll make up for it in tax breaks.

[Knee Deep in Water Chloe]

If you're feeling like you want another house to take on, my MFH (which has a few different acronym meaning now associated with it    
can totally be yours!


I'm sorry you're going through this. I know how stressful it is. Is the rent covering your expenses?

[phil5185]

I never sell an underwater rental house, I keep it, I re-rent it, and wait for the market to GIVE me equity. No need to BUY equity.  (People that are often forced to move/sell their homes while underwater  - but never a rental).  You're already past the 5-yr owner-occupied tax exemption, no issue there - just set it up with a PM and let it grow).

[The Home 6]

Rent has been 200 dollars short of the mortgage.

[phil5185]

Rent has been 200 dollars short of the mortgage.

Is it time to raise the rent? Or is it already at market? (A PM will probably get higher rent that you would find with privates ads)

And the monthly depreciation write-off adds about $75/m to your rent check (maybe more, depending on your tax bracket).

[The Home 6]

It is below market, phil.

[Knee Deep in Water Chloe]

My choice ahhas been to hold on to the house. Being out $700 per month and being able to deduct that from my AGI, along with interest, is far better than having the amount I'm underwater be suddenly due. I cannot pay that, so maybe it's an easier choice for me than it is for you. 
My house is underwater at least $50K. 

[Bonny]

Aug 24, 2015 18:33:38 GMT -5 The Home 6 said:

It is below market, phil.

Would market rent cover PITI? What about the PM's fee?

With the stock market undergoing a 10% correction in the last 10 days there's a good chance that we've seen the market peak in real estate for this business cycle.

The Home 6, have you called your lender about whether you actually need to come to closing with cash or if they will allow you to have an unsecured LoC that you continue to pay off over time?

[zibazinski]

No matter what, you're going to have to put money into it. So do it once or do it every time you turn a tenant in the hope the market corrects.

[The Home 6]

Market rent would cover PITI, and hopefully most of a PM's fee. I shall call my lender today and ask about the LoC, Bonny. 

Zib, I hadn't thought about it that way. Thank you for giving me another perspective. 

[gooddecisions]

Aug 25, 2015 5:35:10 GMT -5 The Home 6 said:

Market rent would cover PITI, and hopefully most of a PM's fee. I shall call my lender today and ask about the LoC, Bonny. 

Zib, I hadn't thought about it that way. Thank you for giving me another perspective. 

Not necessarily. I have had renters change over several times and not had to pay anything. We do a walk through before with the expectation that the houses are left In comparable condition. Any damage or additional cleaning fees would be deducted from the deposit. So far I have always refunded the full deposit. Knock on wood.

i actually think it's a good thing your current tenants are moving so you can finally collect full market rent.

[sarcasticgirl]

Aug 25, 2015 7:13:23 GMT -5 gooddecisions said:

Aug 25, 2015 5:35:10 GMT -5 The Home 6 said:

Market rent would cover PITI, and hopefully most of a PM's fee. I shall call my lender today and ask about the LoC, Bonny. 

Zib, I hadn't thought about it that way. Thank you for giving me another perspective. 

Not necessarily. I have had renters change over several times and not had to pay anything. We do a walk through before with the expectation that the houses are left In comparable condition. Any damage or additional cleaning fees would be deducted from the deposit. So far I have always refunded the full deposit. Knock on wood.

i actually think it's a good thing your current tenants are moving so you can finally collect full market rent.

as a renter, I've never had a cent of my security deposit withheld. 

I usually leave a place in better condition than when I moved in. 

[Bonny]

Aug 25, 2015 7:13:23 GMT -5 gooddecisions said:

Aug 25, 2015 5:35:10 GMT -5 The Home 6 said:

Market rent would cover PITI, and hopefully most of a PM's fee. I shall call my lender today and ask about the LoC, Bonny. 

Zib, I hadn't thought about it that way. Thank you for giving me another perspective. 

Not necessarily. I have had renters change over several times and not had to pay anything. We do a walk through before with the expectation that the houses are left In comparable condition. Any damage or additional cleaning fees would be deducted from the deposit. So far I have always refunded the full deposit. Knock on wood.

i actually think it's a good thing your current tenants are moving so you can finally collect full market rent.

At a minimum I usually need to paint. Last turnover was painting, replacing a toilet (and of course replacing the flooring around the toilet because the footprint is different), replacing a screen door and some miscellaneous repairs that the new tenant wanted. Houses get old and there's just stuff that needs to be repaired/replaced which cannot be charged back to the tenant. And while it didn't happen this time, there's usually a week or two of vacancy needed to get these items taken care of.

ETA: And I agree that healthy tenant turnover is about 3-5 years for both the house and to review your rents.

[phil5185]

as a renter, I've never had a cent of my security deposit withheld.
I usually leave a place in better condition than when I moved in.

We had several SFH rentals over the past 40 years, the above has been my experience.  I remember one woman who apologized on the walk-thru, said she had no time to clean the oven, asked me to keep $100 of her deposit. The house was spotless, I returned her whole deposit.
I'm guessing that I return the entire deposit about 90% of the time.

In my houses, renters typically stay about 2 yrs (altho one was 19 years), young families w/ pre-schoolers are saving for a down payment, deciding where their 'permanent' jobs will be, where the kids will go to school, etc. Most want an initial lease for their protection - but I don't hold tenants to the lease, I tell them that I want a 30-day notice - but don't worry about the 'one year' if you find a house, want to move, etc.

Had a section 8 one time. They pushed the screens out every year - every year the Section 8 Inspector made me put in new screens, this went on for about 6 years. (that is my first and LAST section 8, not a nice bureaucracy).

One time a lady with a teenage son called and said that the shower floor cracked/leaked. As I came in thru the carport there sat a very clean motorcycle engine on newspapers - lol.

But most folks leave a house pretty clean. The military families are especially good - they usually want to stay on the "live off-base" list. I use semi-gloss, off-white paint on all walls in all the houses - that way a tenant can easily wipe below the toddler finger-print/crayon line.

But one guy took all of the light bulbs - he said that in 3 years he had replaced them all so they were HIS.  OK, not a hill to die on, lol. But it does take some time to go thru an entire 3bd2ba and replace a jillion bulbs.  And get it done before the house could be shown.

[tskeeter]

Aug 25, 2015 12:15:39 GMT -5 phil5185 said:

as a renter, I've never had a cent of my security deposit withheld.
I usually leave a place in better condition than when I moved in.

We had several SFH rentals over the past 40 years, the above has been my experience.  I remember one woman who apologized on the walk-thru, said she had no time to clean the oven, asked me to keep $100 of her deposit. The house was spotless, I returned her whole deposit.
I'm guessing that I return the entire deposit about 90% of the time.

In my houses, renters typically stay about 2 yrs (altho one was 19 years), young families w/ pre-schoolers are saving for a down payment, deciding where their 'permanent' jobs will be, where the kids will go to school, etc. Most want an initial lease for their protection - but I don't hold tenants to the lease, I tell them that I want a 30-day notice - but don't worry about the 'one year' if you find a house, want to move, etc.

Had a section 8 one time. They pushed the screens out every year - every year the Section 8 Inspector made me put in new screens, this went on for about 6 years. (that is my first and LAST section 8, not a nice bureaucracy).

One time a lady with a teenage son called and said that the shower floor cracked/leaked. As I came in thru the carport there sat a very clean motorcycle engine on newspapers - lol.

But most folks leave a house pretty clean. The military families are especially good - they usually want to stay on the "live off-base" list. I use semi-gloss, off-white paint on all walls in all the houses - that way a tenant can easily wipe below the toddler finger-print/crayon line.

But one guy took all of the light bulbs - he said that in 3 years he had replaced them all so they were HIS.  OK, not a hill to die on, lol. But it does take some time to go thru an entire 3bd2ba and replace a jillion bulbs.  And get it done before the house could be shown.

Didn't you agree that he could have the bulbs that he provided, but ask him for the bulbs that you provided when he moved in, so that you could put your bulbs back in?  Would be worth it just to see the look on his face.

[zibazinski]

After 6 years there's a ton of stuff to do. Paint being the least of it. My tenant has been in forever. The place will need carpet, paint, appliances. I'm hoping that some investors take it off my hands and she can just stay there. Landscaping will be huge. Pressure washing

[zibazinski]

Yup, used to be section 8 protected the landlord against their tenants. They lost Housing for two years if they damaged the place beyond normal wear and tear. No more. I told Housing that's why I stopped taking Housing. Not true but I thought for those willing to be punished for taking those kind of tenants, I'd put in a plug for them.

[Bonny]

Aug 25, 2015 12:15:39 GMT -5 phil5185 said:

as a renter, I've never had a cent of my security deposit withheld.
I usually leave a place in better condition than when I moved in.

We had several SFH rentals over the past 40 years, the above has been my experience.  I remember one woman who apologized on the walk-thru, said she had no time to clean the oven, asked me to keep $100 of her deposit. The house was spotless, I returned her whole deposit.
I'm guessing that I return the entire deposit about 90% of the time.

In my houses, renters typically stay about 2 yrs (altho one was 19 years), young families w/ pre-schoolers are saving for a down payment, deciding where their 'permanent' jobs will be, where the kids will go to school, etc. Most want an initial lease for their protection - but I don't hold tenants to the lease, I tell them that I want a 30-day notice - but don't worry about the 'one year' if you find a house, want to move, etc.

But most folks leave a house pretty clean. The military families are especially good - they usually want to stay on the "live off-base" list.

My best and worst (in terms of damage) have been military.

Worst-enlisted man and his family in my mother's condo for two years. Wife left him halfway through the lease and he refused to tell me. Left the house a complete pigsty including ruining my mother's beautiful wool carpeting. I wound up taking his entire $3,500 deposit and that still wasn't enough. I should have called his C.O. but we were moving back from Germany and I was going through an eviction with my SF Bay Area housing that we were moving back to. Probably one of the most stressful summers I ever had.

Best tenant I've had was a military officer and his wonderful wife. He just finished officer candidate school and is now stationed at the Pentagon. These are people I could be friends with. Paid their rent two weeks early (and once twice!), let me know when serious things happened, (she) fixed what she could and left the place in excellent condition. Oh, and when the oven needed to be replaced she used their military discount. I was so sorry to see them go.

[Anne_in_VA]

Every place I've rented I've gotten the entire deposit back with one exception.  I should have known when we rented though, as she had a bunch of nit picky rules.  When we moved out she nit picked us to death, ended up keeping almost half our deposit.  DH was livid, but we were so busy we didn't fight it too hard.  DH had actually made repairs we didn't get reimbursed for, but of course she didn't take that into consideration.