Sell or Rent?

We have had great success with renting our first home and carrying 2 mortgages. We have been asked by quite a few people about the details of how it all works and how to get started in the renting process, so I thought a post was in order. I will preface this post by saying that we know the day will come where it will be difficult to carry 2 mortgages, but for now it works for us and we are very pleased with the whole situation.


You have to make the decision whether to sell your home or rent it. Duh right? This is probably the toughest decision. Remember when I mentioned that decisions aren't always black and white? For us we had no choice. We had refinanced just 6 months before we moved. We obviously didn't know we would be moving (to make refi worth it you are typically advised to stay in the home 2+ years to recoup closing costs). Honestly though we don't regret refinancing one minute because it lowered our monthly payment making what we charge for rent more affordable. Had we sold we technically owed more than our home was worth (not by much, just from the closing costs added to our loan). And seeing how the economy went the last 5 years, we actually lucked out. Thankfully the market where we bought wasn't "hot" 5 years ago so it wasn't affected as bad as some bigger cities were.


Advertise. If you chose to rent you've gotta get the word out. We chose not to "publicly" advertise. So we didn't run ads in the paper or put flyers up in town. We wanted to be more selective about who our tenants were. They are going to be living in our home afterall. We advertised on facebook, through word of mouth, and at our local Bible college. August is typically a good month for people moving into a college town and it just so happened that August was the month it was. We found tenants in less than a week. Also this may fit under the next category but we chose to run a credit check. We know this isn't a fool proof method, but it gives us an idea of their payment history. I can't remember exactly how we did it (Josh did it) but we went to the credit bureau site and typed in the tenants email address and the bureau sent them a link to fill out with their personal information. Then the credit history was reported to us upon them submitting the link. That way we weren't responsible for any personal information (social security numbers, etc.). We didn't run background checks in this case because we actually knew of our tenants. If they had been total strangers we would have. 

Should you hire a property manager? It depends. First of all we were new at this and it would have been ideal to hire a property manager. But my parents have been landlords for my whole life. I've grown up around having a rental house and seeing the ups and downs it brings. We also used their knowledge to draw up a lease. That was probably the most difficult part. But I called my dad whenever we had a question about "lease/law wording" and he helped. If this is totally out of your comfort zone, I would recommend hiring someone to help. You also have to keep in mind that property managers get paid a certain % of the rent money. You must take that into account when you are coming up with what to charge for rent. Also we are about as far away from a rental as I would be comfortable with. We live just over 100 miles away. Anything more and we would probably have a property manager. We also have our a/c guy, plumber, and electrician on speed dial just incase. 

Lease. I already mentioned that you need to draft a lease, but there's lots of important things that needs to be included. Are you okay with pets? What if the tenants want to paint? Are you leaving anything behind that you expect to be there when they leave? This is very individualized to the situation. For instance we were okay with pets as long as we know about them. As far as paint, again we are okay with it (tenant funded) but they just need to run the colors by us (no fluorescent orange or black walls). I wish I could say I've never had to paint over a black wall, but I have. My parents had renters that didn't exactly stick to their lease terms (and didn't receive their deposit back either). Oh and I've had to paint over sharpie from walls. Yeah. We left alot of things behind at our house because when we moved out we weren't sure where we'd be living. We left our patio furniture, a few ladders, our lawn equipment, and other misc things. Those things are all drafted in the lease. 
Figure out a price. We aren't in this to make money. We simply want to cover the mortgage, we include pest control services in the rent, and a little bit to put aside for repairs. When I say a little I'm talking no more than $50 a month. Things break and we don't want it to be a hardship on our family when they do break so it's nice to have a cushion and pay cash when it inevitably happens. Also figure out a deposit amount that they pay with the first month's rent. Again this is going to depend on the circumstances. Make it fair to you and them. 
Maintenance. This should also be included in the lease (what's the tenants responsibility and what's our responsibility). We require our tenants to keep up with the lawn maintenance, but we make sure the air filters are changed and the smoke detector batteries are working. There's more written in the lease but those are the major things. Obviously if the septic tank needed to be pumped we'd be responsible for that too (but we had it pumped right before we moved).
This shouldn't need to be said but it happens. Stay in touch with your neighbors. They know what normal activity is. My parents had a bad situation a few years ago where the neighbors knew things were going on in the house but no one ever said anything. Since then my parents leave their contact information with the neighbors, just in case. It doesn't matter how many times you drive by, you may not see all that goes on. Your neighbors are gold when it comes to this. 
Hire a tax professional. We did our taxes by ourself for many years, but once we added the rental it was out of our hands. They were able to find deductions we weren't aware of and they have great advice when it comes to keeping track of all receipts and necessary documentation for tax time. Even our tax person said "Yeah, you had alot of changes this year. Good thing you came by." To us whatever they charged was priceless. We just couldn't have done it ourselves and felt confident enough the face the IRS if audited. 

We have taken the advice of our mortgage company and we keep 6 months worth of rent in our savings account just in case. When we were approved for this mortgage they required that amount of cash plus our downpayment to be in our account during the process. We figure it's just good practice to have that emergency fund just in case. 1. In case something huge breaks. 2. In case we don't have renters for a while. We thankfully worked hard to put a new roof on and replace the siding before we left so those "majors" are covered for a while. 

If I haven't already said it, please know that we are so thankful to be able to do this. Not everyone is comfortable carrying two mortgages, but given the circumstances, we felt it was the right thing to do. I mentioned before that when we bought the home we are living in now that we pay less for our mortgage AND HOA fees than we would to rent a 2 bedroom apartment. So for us this really was a win-win situation. We had to find the delicate balance of what we could afford and what we were comfortable paying each month and find a place that fit our budget needs and our family. The rest? It's history!

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