Tuesday, June 07, 2005
House #1 - A Rental?
My wife and I had some serious discussions recently about leasing House #1 out, and I have been trading emails with my RE agent about it. She sent me some updated rental comps, and the median price would give me positive cashflow. I still don't favor some of the stipulations in the Lease Agreement, but I may just go forward with it. I would still need to find a PM to deal with the day-to-day stuff as neither my wife nor I are very landlord-savvy. Even adding in a vacancy factor of one month plus 8% for a PM, the property would still cashflow positive. Of course, the big plus with leasing/renting is the fact that you are building equity with debt paydown and appreciation. I figure I can refi and pull some cash out to pay off my recovery costs to date and a have a little for holding costs until a tenant is secured.
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6 comments:
What in the lease agreement don't you like? And it's YOUR agreement! If you don't like it, take it out!
Is your 8% quote for property management accurate? Most places I've seen want 10% of the rent.
I think at one point you were considering lease-optioning it. If you go this route, you won't need a manager since the tenant would be responsible for repairs.
It's true--our property manager charges 10%.
I can tell you're flexible (and your wife is becoming more accustomed to the BNH idea). Would you be in violation of your agreement with your agent if you were to advertise the property in the newspaper as a L/O or a rental? Would you have to pay her if YOU found the tenant? If not, you might consider running two different ads in the For Rent and the Lease To Own sections of the newspaper classifieds. You'd see then what people are interested in doing. If you do end up just renting the house out, you can hire a property manager to handle it after the fact. And, then, if you still would like to sell the property, advertise it as a investment property that's already rented. Lots of investors buy at retail prices just for the cash flow. I know, because I lose properties to them during the bidding process.
Steve,
In case you need one, here is a good place to find a free lease contract:
www.ilrg.com/forms/index.html
Shaun - There is one clause that states something like if I find a tenant anytime within 60 days AFTER the contract expires, I still must pay my agent her fee. There were a couple more, but that's all I can remember right now. PM company's in my area usually charge 8-10%, however, my mortgage broker told me his PM company charges only 6% on top of 100% of one month's rent to fill the property. I'll have to call around to find a good, but economical, PM company.
Trisha - Yes, I would be in violation. Not technically a violation really, but it stipulates that if I get a tenant I still must pay her the fee (another clause that's 'against' me). Thanks for the form site. I found that same site by chance a couple of months ago. I printed out the L/O form for TX, and will have a RE attorney review it first before I ever use it. My wife seems to be warming up to BNH's, but only time will tell. She's been known to change her mind about things quite often. ;-)
Nikki - I haven't signed a Lease Agreement yet, but I'm locked-in to a Sellers Agreement for several months. I could get out of the Seller's Agreement, but I'd have to fork over a $350 termination fee.
Hi Brian. You are correct on all accounts. The biggest reason is because I have the place already under contract. True, I could pay my agent the $350 termination fee, and be done, but my wife seems to really want to sell this house, also. We are also going through a lot personally (nothing alarming - it's just stuff that's taking a lot of our time, like getting bids to have our own roof replaced due to a massive hail storm). I also would need to float the L/O contract I have past a competent RE attorney (more time/money). I'm probably shooting myself in the foot not doing it, but we just don't seem to have the time right now for much.
I know - terrible answer. :-P
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