Energy inefficient houses with lots of grass \ok to be rentals?

[Joshua Amezcua]

Hello!

I am finishing up the last of the rehab/renovations on my primary residence. My wife and I are trying to decide if we want to rent our our current home or just sell it and roll the $150'ish thousand into buying a couple rentals. We can buy another primary residence for ourselves with $0 down using VA home loan. Rates are high, but we have good income and could always VA IRRRL refinance when rates come back down.

The cashflow on our current home would be about $800 a month, managing the property myself. But I have some worries that my house won't be a "good rental" due to how expensive it is during the summer.

Electric bills around $500-600 when running air on 78. It simply doesn't turn off all day and honestly it's not comfortable because it never seems to actually get to 78. It's a two-story house with a tri-level living room. We've had the A/C tuned up so it's running as efficiently as possible, but we would have to upgrade the entire system and further insulate the entire house to make a significant impact. One company quoted me about $20k for this. That's a huge out of pocket expense.

Additionally, our water bills are around $400 as the house has huge grass lawns in the front and back yards. We water every other day and I installed low-flow sprinkler heads but still it's just a lot of grass. There are 7 total zones. This was initially intended to be our forever home, so we landscaped with the kids and pets in mind. Most rentals we see are just rocks front and back. We could replace one or both yards and do turf or rocks, but again that's another massive out of pocket expense.

We would have the tenants pay the utilities. But I'm imagining some angry phone calls and emails when they get the $1000 combined utility bills. I'm sure we'd have to tell them up front. I don't know it's just a weird situation and I'm not sure what to do. It would cost around $30k to get one of the yards changed out to hardscaping and upgrade the a/c and further insulate. I'm sure if I do a long term cash on cash analysis it would be worth it, but looking for advise before we proceed.

Note - this thread posted before I was ready to submit so I've had to make a ton of edits!