Housekeeper & Lawn Care

[Ryan Ahlgrim]

Thinking about renting out the home I'm currently living in after we move in a few months. As part of the rent price I'd like to include a cost for a housekeeper and landscaping crew. The housekeeper would come every other week and the landscaper once a week. This way I know the home is being property taken care of.

Any thoughts? Good idea? Bad idea?

[Jon Holdman]

Lawn care, maybe. But you say "As part of the rent price I'd like to include a cost for a housekeeper and landscaping crew". Sorry, but that just won't work. You have to price your rental competitively with similar properties in the same area or you will get a crummy tenant. Good tenants have their pick of places, so they pick one that's priced right. Crummy tenants have few choices so they will pay a higher price to have somewhere to live. So, figure out the going rate for rent and price your's accordingly or a bit lower.

If others include lawn care, they you may have to include it, too. Usually for SFRs its not included and is the tenants responsibility. As is keeping the place clean. Most tenants will do a reasonable job of keeping the place clean. Some better than others. Some are very messy. Few do a good job with lawn care. Maybe you'll get lucky. But if you try to tack the cost of these services onto the rent you'll overprice the place.

You say something that tells me you should consider selling - "home". When you turn it into a rental, its the tenants home. For you its just a property. "Home" conveys emotional attachment. The day you finish the fixup after you move out is the nicest you will see that house until you really do choose to sell. If you cannot emotionally handle tenants making a mess of your place, don't do this. Just sell it and move on.

Also, you have to be realistic about the cost of owning a rental. Read in the rental property forum about the 50% rule. That rule of thumb says that over the long term and for a portfolio of properties 50% of the gross scheduled rent will go to expenses, capital and vacancy. From the remaining 50% you pay your debt service (the P&I part of your payment) and get your profit. For one house in one year you can do somewhat better or you can do much worse. But don't even think that everything left from your rent after you pay the mortgage payment is cash flow. That's not even close. Now, if you self manage, you can earn a good chunk of that 50% for yourself. So your expense might be more like 35-40%. But if you're using a PM, assume 50%. And save up six months rent as a buffer for bad things.