Primary Residence into Rental?

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Primary Residence into Rental?

Curtis BrownPro Member
Member since 2020 · 7 posts · 1 vote

Hello everyone!

I'm considering moving out of my house and turning it into a rental. Based on my research I think I can get about $2400 - $2600 monthly rent with a monthly expense of $2139.28 (that's including mortgage and saving for things like capex, repairs & maintenance, etc.). I'm wondering if it's worth turning my current home into a rental since it's the only one I'll have for many years (most likely). Any thoughts? 

Additionally, a lot of experts are saying the real estate market (among other markets) is going to have a significant correct soon. In terms of home buying, I think I should wait to see what happens this winter and decide if I am going to do this. I am also aware that mortgage rates are going up while the prices are expected to go down so it might not feel like a good deal from a monthly-mortgage payment standpoint. What do you guys think?

Thanks for any perspective you can share. 

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
4y
Quote from @Curtis Brown:

If it rents for $2,400 and all your expenses are $2,140 then that leaves you with $260 cash flow and is a good deal.

Nobody can predict the future but there's plenty of red flags concerning the economy. We're at 3% unemployment but restaurants can't find employees? For the last two years we've seen local restaurants closed 1-2 days a week - even at the height of tourist season - for the first time in history. Property values increased 50% in two years. I sold a used car for more than I bought it for six years ago. We've seen massive influx of people with no experience buying investment property around the country, helping drive prices exorbitantly high.

Waves crash harder and faster than they rise.

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  • Greg R.
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y

    What exactly are you trying to accomplish by this? How did you analyze the financials of renting your home? A lot of inexperienced landlords don't know how to account for all of the expenses they'll encounter. 

    And where are you going to live? Rental market is very high right now, so if your plan is to rent out your home only to make $200-300 a month and have to pay sky-high rent somewhere else, I'm not sure I'm tracking the point of this scenario. 

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y
    Quote from @Curtis Brown:

    If it rents for $2,400 and all your expenses are $2,140 then that leaves you with $260 cash flow and is a good deal.

    Nobody can predict the future but there's plenty of red flags concerning the economy. We're at 3% unemployment but restaurants can't find employees? For the last two years we've seen local restaurants closed 1-2 days a week - even at the height of tourist season - for the first time in history. Property values increased 50% in two years. I sold a used car for more than I bought it for six years ago. We've seen massive influx of people with no experience buying investment property around the country, helping drive prices exorbitantly high.

    Waves crash harder and faster than they rise.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    2Reply
  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    4y

    @Curtis Brown

    I think @Greg R. and @Nathan Gesner made some very good points to consider. 

    I think you need to ask yourself some important questions about this decision, such as:

    If you move out of your primary residence, are you going to buy or rent?

    If you didn't move out of your primary residence, do you have another investment strategy?

    What are your goals related to real estate investing? 

    Are you prepared to self manage the property? What systems would you use to manage?

    Do you have a plan for screening renters so you don't rent the property to a bad tenant?

    Can you weather a storm if things go wrong?

    The economy does suck right now but there is never going to be a "perfect" time to invest. Experts are wrong all the time and you should take all "expert" forecasts with a huge grain of salt because nobody can consistently and accurately predict the future, especially for very complex things like the economy.

     If it makes sense for YOU to invest, you should take action. Even if things don't go exactly according to plan (they rarely do), you'll gain more experience and be better off in the long run.

    1Reply
  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    4y
    Quote from @Nathan Gesner:
    Quote from @Curtis Brown:

    If it rents for $2,400 and all your expenses are $2,140 then that leaves you with $260 cash flow and is a good deal.

    Nobody can predict the future but there's plenty of red flags concerning the economy. We're at 3% unemployment but restaurants can't find employees? For the last two years we've seen local restaurants closed 1-2 days a week - even at the height of tourist season - for the first time in history. Property values increased 50% in two years. I sold a used car for more than I bought it for six years ago. We've seen massive influx of people with no experience buying investment property around the country, helping drive prices exorbitantly high.

    Waves crash harder and faster than they rise.


     Wow, I like this. Perfectly sums up what we have taken as the new normal but in reality there is a serious problem here. Regardless being a person of action will always payoff in long-term, short-term is impossible to predict as you know

    [email protected]319-288-5382
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  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    4y

    Another thought I have is can you look to do a house hack on your primary. Having someone pay your mortgage while you are living there gives a great feeling of freedom, you will get to see if you like real estate investing without doing something that will be harder to unwind if you dont like it. I certainly would not make my property a rental if it is the last one you will be able to buy for awhile. I think the main purpose of making your primary a rental is to continue the stack and go get another secondary mortgage with a low down payment. 

    [email protected]319-288-5382
    Jared Hottle Real Estate59 Reviews
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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y
    Quote from @Jared Hottle:

    Care to elaborate?


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