Should I rent my $850k home?

Question

Hello,
I'd like some investors to weigh in here... I live in South Charlotte in a very nice neighborhood with great schools. The only problem is my rental portfolio is in South Carolina (3 lake homes we airbnb) and my wife and I would like to fully commit to this business. We tried to sell the home earlier this year but failed. At the time we were flipping two other homes with our three kids, two dogs, and me working a 9-5. Not an excuse but the stress of all this caused us to take it off the market early and we only received two lowball offers. That being said, I'm determined to move. This house is in really good shape, has a walkout basement with a pool table wet bar, and hot tub. The home is 4 bedrooms 3.5 baths and 4000 square feet. My wife is incredibly worried about renting this place out. Has anyone seen success renting in a luxury type of market? Are there a few lessons learned I could modify my strategy with? Are there certain websites I should list the house on which focus on a luxury / executive style market? Any advice on this would be immensely appreciated!

Maranda Tucker · Answer

If the numbers work, highly recommend you work with a PM who has solid tenant screening processes. Good news is, a well kept, higher priced property typically attracts higher quality tenants! We have a few $700+ properties that have done well in this market, even in the holiday slow down. Here to help and happy to if you have any questions!

Shiela R. · Answer

All sound advice here.  Just a friendly reminder that price and luxury are relative.  Some would think $850k is inexpensive.  Others would think it is more on the pricey side.

If you don't want to do a straight rental, you could lease option or carry financing.  These strategies put the maintenance on the TB or buyer and weed out less serious parties bc they have skin in the game.  Also, I don't know but would be shocked if there isn't a site for executive and/or furnished rentals in Charlotte.

Otherwise, sell retail and move on.

Scott Simon · Answer

very helpful words, thank you. I am seriously considering a lease to own option given the current market and the possibility to have some of the maintenance offloaded on the lessee. Also, really interested in finding a website that caters to this type of market. While $850 might not be “expensive” it’s expensive to me and the home has luxury touches in every room. I do wish it had sold but things were quite complicated at the time with the work going on across two states.

last thing. What’s the point of having cake and not being able to eat it?  Yes I was my cake and yes I’m going to eat it. In all seriousness you bring up a great point.

Kai Kopsch · Answer

Charlotte, NC, has 1.6 months supply of inventory at this moment (normal is 6 months), and the Average Sales Price from November 2021 to November 2022 is up by 11.9% $436,754 to $488,929. Top homes close in less than 5 days. Like Henry says you can complain about the market or just make money in this market. The BP members I helped close on homes this year are all very happy with their investments in this market in CLT.

Drew Sygit · Answer

Typically, the higher the value of a property, the lower the rental ROI.

Rents do not increase instep with values.

Amy Shutes · Answer

I would say use a property management company if you have any concerns.  They handle homes in every market including luxury.  They take a small 6-10% rate depending on who you use and the level of service and take all the worry away.  The house most likely will not look like it did when you left from normal wear and tear.  A property management company can do inspections and get qualified responsible tenants for you.  I recommend Loretta Dawkins.  When your ready to sell let me know.  I'd be happy to get it sold for you.  I hope that helps.

Will Fraser · Answer

Hey Scott!  Another thing relevant to consider that builds off of Sheila's words above is that "luxury" and "expensive" are very relative concepts.  If $850k is 2x the median sale value for your metro then you may have a devil of a time leasing it well, though it is still possible.  However if it is 50% of the median sale value you may rent it with ease.

When you are considering a lease-purchase option sale you're really looking for a certain buyer, who has certain motivating factors.  IF $850k is relatively expensive for your market then you may not like the prospective tenant-buyers you find.

However selling using seller financing in a high interest rate environment can be attractive to the opposite end of the spectrum from the tenant-buyer side.  A shrewd business owner looking at the opportunity to buy on a 6.25% interest loan when the prevailing rate is 7.25% may gladly bring 25% down and be tickled pink here.

Phil Barry · Answer

Hi Scott,

I know you mentioned selling, but have you considered selling and purchasing 2 $400k properties instead?  Marking fluctuations don’t impact yoU as much if you are buying and selling at the same time.

You mentioned AirBnB.  Have you considered short term renting this property?

No matter what the case is, STR or LTR, renters will damage your property.  It comes with the territory.  This might be too much of a personal emotional toll on “your house”.Best wishes on whatever path you take!  If you need any guidance on listing your property, please reach out any time.

Thank you!

Should I rent my $850k home?

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