I know I’ve talked about our new house a ton over the last few months, but I don’t think I’ve really gotten into the the fact that we were planning to rent out our old home. We’ve rented out a spare bedroom in our own home on and off for about 5 years, but this will be our first leap into being landlords for a whole house. It’s actually taken longer than I thought it would to get it ready to go, but it is 99.9% done and our new tenant will move in tomorrow!
What We’ve Done
Okay, so here is everything we had to do (and how much it cost) in order for the house to be ready to go:
- Repaint the entire bottom floor since no one except Mr. BFS likes Mint Chocolate Chip Green as the main color - $125 thanks to free labor from Isabelle and Ivy!
- Sand and repaint back door since it was getting rusty – $20
- Touch up paint and nail holes elsewhere – $15
- Replace upstairs guest toilet – $195 ($95 toilet kit and $100 labor – yeah, I just hired help, don’t yell at me)
- Replace downstairs toilet – $165 ($85 toilet kit and $80 labor – yeah, I just hired help again but went to Lowe’s for the toilet instead of Home Depot)
- Hired a professional move out cleaner for the whole house – $180
- Total Cost So Far: $700
And I can do math, so this really would have only cost us $340 if we didn’t outsource, but that would have taken us 3-4 extra days and we were already behind from the move. This allowed us to catch up as quickly as possible. Plus, we are just extremely tired from the last month…I think there is just smart times to outsource…
What’s Left
Despite thinking that everything was ready to go, a few little things came to our attention yesterday that we will be running over to take care of today:
- The upstairs guest toilet is continuously running. It’s only a couple of months old, and already cost us $195, so it better be a very cheap (aka “free) fix or I will be throwing a fit…
- We need to test all of the fire alarms and replace their batteries. One of the alarms in a guest bedroom is beeping all of the time now, so we’re going to start everyone off on the right foot and just replace all of the batteries in one swoop. This will probably cost us about $20 in 9 volt batteries since there are 5-6 fire detectors throughout the house.
The little stuff is just annoying as heck, and I know it gets worse…
Financial Results
Overall, renting out our home was the only, truly logical decision. It could only sell for around $110,000 right now, but it is renting out at $1200 a month. Even with maintenance costs and property taxes, we’ll be making back the sell price every 10 years or less. I know managing a rental is a pain in the butt since I watched my parents do it for more than 15 years, but the financial return in this case is just too hard to pass up.
It’s just cemented further by the fact that our rental house will be completely paid off in 2013, so the monthly rent can go to a maintenance account for the rental house and then the extra cash can be thrown at our mortgage for the new house. So by this time next year, between that rental income and the $600 a month we get from renting out a spare bedroom, we’ll be bringing in $1800 and be paying out $2150 for our remaining mortgage, all property taxes, both home owner’s insurance policies, and the new HOA dues. That would actually be better than I thought a few months ago…
And the long term plan is to pay off the new house by 2022 and stop renting out a spare bedroom too, so uber long term, we’d be bringing in $1200 and paying out about $1200…that’s the plan at least…fingers crossed way in advance.
Have you ever rented out a house? Any suggestions or advice?
Are you having a lawyer draw up a rental contract? Are you having a property management company handle anything for you? Are you using a service to screen tenants and perform background checks?
Crystal, one thing I am not seeing you mention(though you may have already taken care of it) is a CO detector. If you have gas appliances – especially if you have a gas central heat unit, you need CO detectors around the house, particularly in the bedrooms. Since carbon monoxide is odorles, undetectable by the normal human, and deadly, this is pretty important!
Sounds like as usual, though, you have most everything under control.
Wow this is awesome! You will definitely have to do lots of posts about your renters and updates. We plan on doing the same thing.
Wikihow has a good article about tracking down and fixing the most common problems. I know when I’ve installed new insides to the tank, I generally have to go back and make at least 1-2 adjustments afterward to get it working right. Chances are it’s an easy fix, they’re just time consuming.
Changing all the fire alarm batteries is a really excellent point! Totally worthwhile, it protects you and your tenants, plus is really cheap to do.
Hope the toilet works out easily, that sucks.
I have not but plan to rent out my current house when we eventually get a new house. I look forward to reading more about it!
We are debating this topic as we speak. We bought a great property in August because we saw potential. Now we love it and what to renovate so we can live there. Do we keep two houses and rent one out, or do we sell one to avoid all the hassles of being a landlord? We’re still undecided.
Sounds like you have a pretty good plan which is always a tough step. I helped my grandmother with her rental property and the biggest thing we found was finding GOOD tenants. It is amazing how many people treat the place they live in like a dump. Getting rid of a bad tenant is also not as easy as it sounds (at least in Canada) as all the rights go to the tenant and not the landlord. It is a great source of income, but it is not without its headaches. Good luck!
Don’t denigrate yourself for outsourcing those tasks. They are legitimate business expenses now, so make you keep receipts and claim them on your taxes!
@Squeezer, I am using a pretty generic Texas Residential Lease. I am handling everything and our tenant that is moving in is our housekeeper that we’ve had for 6 years. She also used to manage rentals (aparment complexes though), lol.
@GHarkness, nope, no CO detectors, but there is also no gas line to the house either. It’s all electric. We do have CO detectors in our current house which does have gas (and the things talk, hahaha. When they tested them, they yelled at us…).
@Michelle, I am hoping everything is so smooth that I will have little to write about, but that usually doesn’t happen, hahaha.
@Money Beagle, fingers crossed since we are tackling that either this afternoon or tomorrow morning before she moves in…
@Anne, thanks. I hope so too.
@Lance and Michelle, let me know if you have any specific questions and I’ll try to cover them from our point of view.
@Mandy, I think if I looked at the numbers and it would have taken more than 20 years to receive in rent what we could receive in a sell, I would have sold. But the “quick” 10 year turnaround got me hook, line, and sinker…
@Leslie, yeah, getting rid of bad tenant in Texas is a true pain in the butt. But the person moving in is Jacqui, our long time biweekly housekeeper. I already know that she is super organized, clean, and is looking for her forever rental. And she called dibs on the house as soon as she found out we were moving. So I am truly hoping all of that works in our favor.
@Linda, all receipts kept.
I need every deduction we can get, lol.
Aside from being a major landlord at one time, I rented out my principle residence when we downsized. The more you can screen the tenant before they move in the better off you will be. One of my tricks is visiting their current residence to see how they keep that home. Use it as a meeting of sorts.
I was lucky with my tenant, but I hired a rental management company to do everything for me. I use to travel a lot more than now and just didn’t have the time to manage it. It worked out perfectly. No issues with the tenant he had a great job, there was one incident where they thought he was going to be late with the rent one month, but he came through and paid on time.
I paid 6% of the rent to the rental management company, it was so worth it.
You made the right decision but renting out your home. Real estate is a long-term investments…very long term. And it’s great that you are beginning to have diversity but incorporating real estate and, possibly, beginning a real estate portfolio.
I don’t know if it would make sense now, but you could always look into how much property management fees are to take the pressure off your shoulders. Or maybe wait until you have accumulated more property.
Impressive! I want to buy something for $110,000! But here that would be a hovel.
I am excited for you. I think using the old house as a rental is a great move. Hopefully, she won’t show up wasted drunk to move in!
Smoke detectors should be replaced at least every ten years, not just the batteries. If one is near a bathroom where it is subjected to humidity from a shower, the life expectancy is even less. ESPECIALLY in a rental unit where your frugality could cost someone else’s life, it’s smart to put in new ones. They don’t cost that much.
@Krantcents, good suggestion!
@Call Me, if we ever have another rental property, I really would consider it.
@Ornella, totally will look into it if I ever feel overwhelmed.
@Kathleen, come on down to Houston, lol.
@Kim, LOL…seeing a 60 year old British woman wasted on move in day would make it onto YouTube.
@Zendelle, we’ll totally replace them around the 10 year mark, but that isn’t until around 2015.
I don’t think it’s frugality to leave things be while they are working great.
I agree with Linda about outsourcing – People often forget that time IS money , save time and you save money, you just have to get the balance right here I guess. Nice one on the plan, fingers crossed that it goes accordingly.
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