Renting to rent

Has anyone ever done this? Does it ever make sense? I believe we could get slightly more in rent than our monthly mortgage payment (which includes taxes). It looks like it is the norm for the renter to pay utilities (unlike in the city where heat and hit water must be included).

I don’t know what the tax implications would be. Is it a ridiculous idea to even consider?

We would plan to rent in the area we eventually want to buy in and either sell our current home shortly before buying a new home (the more likely scenario) or if finances allow, keep our current home as a rental.

Re: Renting to rent

I probably wouldn't do it if it was "slightly more".

You are taxed on any profit you make on rental income. This can be offset by considering things like maintenance costs, mortgage payments, etc.

You also have to factor in tenants - whether they will be a pain, how long will the place be vacant after you move out/after they move out, the time an aggravation to fix things at the request of the tenant, the wear and tear the renters will put on the place (will that devalue at resale time).

There are so many factors, it would have to be a significant profit to be worth it in my opinion.

When we bought a house, we rented out my old apartment. It worked out ok, because the rental market was decent and we had a super onsite to help with repairs and minor issues. I don't think I would do it again unless it was a necessity.

Re: Renting to rent

Renting to rent

My parents are realtors. They know plenty of people that do well renting out properties. However, based on the horror stories they've seen with tenants they've always said they would never ever be landlords.

Renting to rent

A friend of mine asked if she can rent knowing we are selling instead of us selling. For one I need the profit as a downpayment and 2, I see how my BIL/SIL are as they rent and if anyone is like them, I would be SOL as a landlord. They have to be the worse tennents on the planet

Renting to rent

Oh, we wouldn't be looking to make a profit. We want to test the waters in the area we want to buy in. I'm not making the same mistake twice by moving to an area we end up hating, especially since the homes in our desired area are astronomical. I worry about selling now and then being priced out of the area if we decide we like it.

I would be happy to break even. Definitely not looking at this as a way to generate income.

Re: Renting to rent

Are you asking about renting your house to someone else? Or are you asking about you renting in a new area that you plan to buy in?

Renting to rent

So you want to rent your old place out and rent in a new area in case you change your mind and want to stay in the old house?

Re: Renting to rent

Re: Renting to rent

The problem with your scenario is once you find a new house you want to buy, not only do you need to give your tenants notice to move out, then you also need to list your house to sell it. That's a lot of effort and you really wouldn't have control over what the house looked like for pictures and showings. PLUS, you'd have to get the tenants to agree to let the house be shown while they're still living there. You could potentially be leaving money on the table if the house doesn't show the way you'd like it to because of tenants.

Also, it's hard enough to get your offer accepted on a new house, adding the contingency of having to sell your house is a negative to start with. And having to add all the other stuff with tenants would be a lot. We sold our house last year and it would have been a HUGE con to have gotten an offer from someone with the scenario described above.

Another point - not having to worry about upkeep of a rental when things break is nice. You just call your landlord. But you would be the landlord for your old house, which is just added stress when you're trying to find a new house. You might as well have just stayed in that house.

All of that being said, we did sell our house and wound up renting for about 8 months while we continued to house hunt. It ultimately was much easier to move without having to sell at the same time. Plus, we were able to stay in our rental for 2.5 months while we did construction on our new house.

The housing market is not going to change so drastically in the next year that you won't be able to afford a house (unless you can't afford to buy now). If you need the proceeds from your current house, then renting it out in the meantime just does not make sense IMO.

Renting to rent

I agree with the previous posters. It doesn't make sense to rent it for a short period of time. Tenants can destroy a place pretty quickly! I'd just sell it first, then get a rental for yourselves, and then buy. I think that's the least stressful way to go, IMO.

Renting to rent

We did exactly that and I suggest not to do it. We have a condo and when we had our daughter we needed to move school districts due to her special needs. Our condo is underwater and we could not sell it without a huge loss so we moved into an apartment in the district we wanted and rented out our condo. We eventually bought a house in the new town we are in and still rent the condo because it's still underwater. It is a nightmare. Even taking the rent price out of it, there are so many hidden costs. We just got a new tenant and in the span of a month, we had to replace the washer/dryer, the stove the refrigerator, called a plumber and an electrician for other issues. You need to worry about lawn maintenance and snow as well. It is not worth the effort and a real pain in the ass. I would sell your house, rent in the new place and buy when your ready.

Re: Renting to rent

I haven't read thru the other posts so this might be redundant but you will need to account for maintenance and repairs as well as times when your property will be unoccupied. These things can add up. On the flip side you will also be able to start depreciating the property for tax purposes which could create a significant tax savings for now. However, you will have to report that as capital gains when you go to sell the property.

Overall I think it's a good idea to try it out for the short term if you plan to rent in a new area anyway.