Hellobee Boards

Not firsthand experience but our close family friend and done that and got burned from horrible renters and it was always headache after headache.

On the flip side, my parents in law have rented our their first home for probably decades now and don't have any major issues. Helps that FIL is very handy and I guess been lucky with good tenants. For them it has been a great source of income for now and for retirement.

Do you actually want to be landlords? It seems like such a headache.

I would sell and get the place I really want.

@catlady: I was only mentioning the size of the downpayment since you had said you would "have to really settle" if you didn't sell the current house first - I'm saying, don't settle!

But sounds like you're pretty interested in renting out the townhouse - again, we have had a great and smooth experience. I'm surprised so many people on this thread are opposed to the idea! Where I live it's super common to rent out your first home when you upgrade. Nearly everyone in our townhouse neighborhood ended up renting theirs out for a while at least. I would just encourage you to hire an excellent property manager who will make sure you get good tenants and handle most of the day to day stuff that comes up. So, will need to factor in that cost too.

To answer your question; we had zero problem getting approved for the second mortgage.

[ETA] One other thing to consider is capital gains, which hits you when you eventually sell the townhouse. You avoid that if you sell within (I think) two years, otherwise you have to pay since it isn't your primary residence. We are still wrestling with whether we'll sell at the 2-year point or stick it out and gamble we'll make up more than that in rent income and home equity.

We are landlords. My SIL lives in a condo we bought. The home has appreciated greatly over the 3 years or so we have had it. She is not the best tenant ( late/ partial rent) and is very slow to report things, which makes it more costly for us. If she wasn't family we wouldn't put up with this, but evictions take time and expense even if we had a non-family renter that was just like her.

We thought about renting our house instead of selling since it would be competitive in the market we used to live in. Ultimately we decided our former house's finishs were too nice and the costs to repair if damaged by a renter would be too much.

I'd probably sell and buy the nicest home I can afford and be happy with. It's weird, but having a home- a room I like makes a total difference in my mood.

@catlady: We just sold our house and stretched to buy a bigger one. It's not a perfect forever home, but it's like 75% there and rest we can fix and update over time. Capital gains taxes was a big factor in the decision since we could net the proceeds with no tax implications.

@catlady: we are renting our condo in Boston after moving last year. It’s been overall positive so far. The rent more than covers the mortgage and hoa, but not by enough to make it worth it only for that. But we expect the property to continue to increase in value so we are counting on that more than just the rent. So far our tenant is good and signed on for a second year.

That said, we had a bunch of things come up in the first year that were annoying. We knew the oven was going to go soon but it died in the first couple months and we had to replace it. The hvac completely randomly died and we had to replace it. Dh didn’t want to pay for a full property manager so he spent a lot of time dealing with those issues that could have been spent in OUR house that we live in.

Overall I think it’s going to be worth it but we will reevaluate before the capital gains kick in (in Boston I think you have to live in it for two of the last five years or something similar. So we have two years to decide).

We are south of Boston and having a similar discussion. We are landlords on a number of properties that we have acquired over the years so we see the value in that. But we are testing the market and just listed our current home, the market is hot which is impacting the price of our next home so if we can pull some equity to land in our forever home it is worth it to us. It truly is a question of numbers and if you are up for being a landlord, it can be a huge pain over time but the long term financial gains are worth it.

@catlady: I kept my the townhouse I owned before marriage for a few years after we moved from the Dallas area to the NYC area. There's so much to consider when you have a rental.

There's the cash flow issue--things can and will break, so you have to be prepared to fix those things immediately in the rental, and deal with the headache of coordinating the renter's schedule with the repairman's schedule (This is if you do this stuff yourself and you don't pay a property management company). You can write off almost every expense related to the rental though, even down to gas money for you to go there and back. So if you decide to rent, keep every single receipt and stay organized. Even if you take a loss on the rent each month, you can write off the loss. Capital gains is murky--to get an exclusion, you must have owned and lived in your home as your principal residence an aggregate of at least two of the five years before the sale (this is called the ownership and use test). I sold my home right before 3 years was up so I could say I'd lived in it 2 of the last 5 years. BUT you can also avoid capital gains if you roll the profit from an eventual sale into another similar investment of a rental home. If you are making a big profit each year because rental prices are much higher than your mortgage+taxes+fees, then you might want to calculate the rental income vs the eventual capital gains tax and see if you come out on top (And the capital gains tax depends on your joint gross income).

As far as being a landlord goes--it can go either way. I have a couple of girl friends who did exactly what I did--bought a house pre-marriage and turned it into a rental post marriage. I also had years of landlord experience because I had previously owned a condo that I rented when I first bought my townhouse, then I always rented a spare bedroom in my townhouse while I lived there. But long story short, I had many years of good tenants (thank god, because in retrospect, I was pretty lax on my landlord know-how), and then the year before we sold, we had a run of super bad "luck" that caused a huge headache for us and it was just too much. My girlfriends have had similar experiences. Good tenants until they got a really bad one. We've all had to evict a tenant.

After several years of good tenants, I rented to a young couple who just sucked. They paid their rent but basically never told me about issues and let a leak go for months without telling me--which caused us to have to pay 15-20k in major repairs. Immediately after they moved out and we made the repairs, we got in a guy who moved in and basically immediately stopped paying rent. So then we had to legally evict him at a time when I also was having LO2--so my husband had to fly back and forth several times for court appearances and sheriff-escorted eviction proceedings, while I was alone with a 2 year old and a newborn at home. So anyway, at that point, we decided to sell, haha.

Luckily it worked out and we still made a profit when we sold, but that last few months was stressful.

Oh yeah also... The luxury of NOT having to scramble to sell and buy at the same time was so nice it would have been worth it just for that! When we do sell it's going to be so so much less stressful since we're already settled in our forever-ish home and not racing against the clock.

Sell. Being a landlord sucks. I felt a huge relief selling our condo the end of August. Even after having to write a check to do it.

@catlady: Partly it was the building that made the renting process a pain the ass. Our first renter was there for three years. We did a background check, he worked, she was a stay at home wife. Then they had a baby. Any time my husband had to go an do a repair he said the place was clean. Well once they moved out, we realized, not so much. It was disgusting. There was so much grease and grim on the kitchen cabinets. It was not normal wear and tear. The next renter was fine, no issues, but we had a personal connection so I think he took better take because of that. But we still had some issues with him being in his 20's and normal drinking behavior and the condo board not liking it. Unless you are making a lot of money, and have it set aside for cleaning, replacing carpet/flooring each time, not worth. We lost so much money over the years in time between renters, fixing things, etc.

We sold the place we outgrew and applied those funds toward our forever-ish home and I love our new house. I love that we have plenty of space and that I can spend time and money decorating it without the feeling that it won't be worth the effort. I have some friends who couldn't sell their condo for various reasons so they decided to rent it and it seemed like a big burden for them on top of their two school aged children to have to attend to issues, find new renters every year, etc.

@catlady: you should have seen the excel spreadsheets DH made when deciding whether to sell or rent, and when to sell if we rented it out. Intense.

@catlady: Ultimately, we're breaking even on our rent collected vs. our mortgage. On taxes, we're able to take depreciation on the condo and take it as a loss on our taxes. Anything you do for the rental in regards to repairs (even mileage driving there and back) is tax deductible which is super nice too.

Ultimately, someone else is paying our mortgage, and we're using it as an investment. Yes, things will come up, but eventually, we'll have a condo that we owe very little on and have built up equity in. We'd like to sell it way down the line to put towards a vacation home.