| Author | Message | ||
     Torquehd |
I have to PCS across country, but just two years ago (when I thought I would have job stability here), I took out a VA loan for my very first house. I was planning on just selling it, which will be a financial burden as this house is in a low-traffic, rural, low-demand area. So after moving, I'd be making two house payments until this one sold. Then a friend of my wife and her husband express a serious interest in getting out of their month-to-month rental and getting into exactly what my house is - a decent little house on a couple acres out of town. They love the house and are willing to sign a contract (we mentioned annual but didn't verbally commit to anything). I've looked into landlord/tenant laws here in Washington state and I'm comfortable enough with the law, and the tenants. I also have in-laws nearby who would handle any repairs or in-person business in my absence. The biggest question in my mind is finances. My mortgage is $940/month. I know that my rent fee needs to be north of that in order to make it worth my while, as well as to create a bumper fund for maintenance/repairs which may be required by law. Any insight into this? Anything else I need to consider? | ||
| Ducbsa |
Insurance and real estate taxes should also be covered. Keep track of all expenses to minimize the net profit for state & fed income tax. If it was local, the cost of maintenance equipment (ladders, drills, etc.) could usually be deducted. | ||
| Strokizator |
If you can't afford both mortgages on your own, don't do it. Anything can happen with renters who may not be able to pay or you may have times when you have no tenants. Either way you'll be on the hook to make both payments. Lots of folks in 2007 got caught by just this thing. | ||
| Ratbuell |
That's exactly what I do. Moved 4 years ago. Soft market, was cleaning and prepping to lose money on a sale, and a college buddy said his little brother and family were on the hunt. Young, no credit, couldn't qualify to buy but good kids...and they've been there ever since. Eventually I'll probably sell them the place. Rent needs to be "fair market value". Research the locale. Don't leave money on the table. If going rate is $1500 and mortgage is $940, rent closer to $1500. They get a deal, you're covered for repairs. Change your insurance coverage. You cover land and dwelling only enough to satisfy your mortgage bank. Tenants cover all furnishings and personals. Alert your mortgage company that it has become a rental. And consider forming an LLC to handle it all. Couple fees and some paperwork will net you easier deductions, and protect YOUR stuff if something goes south and legal action results. | ||
| Hootowl |
Good info here...you may qualify for another VA loan. https://www.veteransunited.com/education/entitleme nt/two-va-loans/ | ||
| Etennuly |
Can be a tough road if you are out of the area. Buddy of mine has had his 600 mile distant house rented for three years. Has a $1500 security deposit. Good renters, always paid, but they got divorced so they had to leave. His rental manager sent him pictures and a description of the condition of the house with a request from the renter for his deposit return. He viewed the pictures realizing some problems. He called one of his former neighbors and decided to make the trip back. He had to take a week off from work to go back to spend about $4500 fixing the house to get it back to near what it was when they moved in only three years ago. The house was left a terrible mess, he even found the AC filter had not been changed since they moved in three years earlier. They wrecked the carpets with four dogs living in the house and every wall needed repainted. Nothing had been done outside other than occasionally mowing. No shrub/bush/tree/edging/window cleaning.....nothing but damage. He was in your situation when he moved out of the house. A realestate sales/rental agent talked him into renting. He cannot afford both mortgage payments, taxes, ins etc, let alone taking off time to go fix it and the expenses of another loan to do that. So you need more than luck to make it happen if you cannot afford both mortgage payments and associated costs. But I have also known folks to run for ever on the edge of their finances to be lucky in the end. If you are going to do it you have to view it as a business venture, not a "hope it works" hobby. The best way I have heard it stated is that if you are to rent a house you are moving out of, you have to see it as you bought that house the day you procured your new house, strictly as a business proposition to speculate on and rent out. Good luck. | ||
| Ratbuell |
Also along the lines of verns post - you can craft your lease to include specifics. Lawn care, interior care, systems maintenance, etc. I also have a rental duplex and have checklists for every room. At lease signing, they are completed - walls, flooring, windows, ceiling, fixtures, outlets, switches, all of it. Signed and dated by tenant and landlord. Lease specifically states all items must be in same condition at time of vacancy or deposit (plus possible repair costs) are kept. Write the right lease, and you can be about as bulletproof as you need to be. And I've found that if tenants see you putting that much attention to detail into the lease...they'll do the same with their daily care. | ||
| Teeps |
Torquehd, The first thing to do is check with the VA mortgage holder to see if you are allowed to sublet/rent the property. Back when I had a VA loan; renting or subletting the property was not allowed. | ||
| Hootowl |
According to the link above, you can't buy a home for the purpose of renting it out with a VA loan, but you can buy one to live in, and then rent it out later. | ||
| Court |
Do yourself a favor and have an attorney either write or review the rental agreement. Write the agreement as if you are preparing to rent to a known ••••••• deadbeat. Renting to "friends" . . like selling cars and bikes . . has a lot of down sides in the event there is any problem or disagreement. Spell out the details for the benefit of BOTH parties. Rent at, or near, market price or prepare to have the transaction viewed as a sham and the difference between the rent and the fair market rent treated as taxable income. Lots of good can come from the deal . . . lots of bad can, as well. Be in control. That cheery enough for you? :-) | ||
| Airbozo |
Not a landlord myself, but having watched several friends and relatives enter that market, I only have a couple of suggestions: Use a property management company and keep every single receipt that may be remotely related to renting that house (like long distance phone calls). | ||
| Etennuly |
Property management people can be as "iffy" as renters. You have to check them out to. That in part is what has happened to my buddy. The other thing is, those contracts that Joe speaks of are only as good as the local laws limits and are near worthless if you don't have the time and money to chase down and sue someone when they simply disappear after having taken a $5000 crap in your house. Other than that, and the unpredictable home market that can leave you upside down and hanging on for hope, it seems like a good idea! Trust no one.....it's about money, and only money, regardless of friendships and relationships and trustworthy intentions. | ||
| Court |
>>>The other thing is, those contracts that Joe speaks of are only as good as the local laws limits and are near worthless if you don't have the time and money to chase down I have 3 friends in that business in NYC. You have someone that doesn't pay the rent or fails to pay the vig on a loan that are in the "effective motivation" business. They have an excellent track record of success. Hey . . . it's not me Kate, it's my family. :-) | ||
| Torquehd |
Thanks for all the input. Still thinking about going for it; going to meet with the couple tomorrow. I'm going to get their permission and talk to their current landlord. | ||
| Ratbuell |
Also do a credit check. An "application to rent" will cover all these things for you as far as permission goes. Google is your friend  | ||
| Dwardo |
I have experience with this: 1) Never rent to somebody you know. 2) Get an agent to handle the business. It's expensive but worth it, especially if you are out of the area. |
