SFH Rental Property with Pool??

Question

Hi there,

New to this site and new to REI, so please let me know if this question should be posted in a different thread. I am looking at a home that has a pool. I have heard from a PM that it is not advised to go for a rental property that has a pool due to liability. However, we live in Tampa, FL area, so a pool is sometimes a perk (depending on the tenant I suppose). We actually would like to have this house as our living home once our son is school age because it is in the top rated school zone for the area. What we would like to do is stay in our current home (paid off completely) for a few more years and continue to save money, while we rent out this home. The small research I have done so far, says we should be able to rent the home for $200-$400 more than our mortgage. I obviously need to crunch some more numbers, but just curious if this pool is a deal breaker?

Robert Melcher · Answer

I have one with a pool. I charge $200 a month more for the pool and have a professional pool service care for it for $175 a month. The gates are padlocked and having the pro do the work means the tenant is unlikely tomess it up. Works fine for me.

Holly Yankus · Answer

Thomas S. Why do you think our current paid off home is not a good rental property? You think the rental expenses would be over $800/month? If we sold the home today, we could probably get around $30k. Its in a starter home/rental home neighborhood.

Melissa Gittens · Answer

I would have to agree with what everyone has clearly stated. There is way to much liability when renting. If it is possible live in the new home you plan to purchase and rent out the current home you are living in to offset the mortgage and any additional expenses for the new home purchase.

Dan Schwartz · Answer

Holly Yankus go for it. If you called your plan "house-hacking," you'd be cheered to the moon.

Kenisha Forbes · Answer

@Holly Yankus maybe its just me, but I think renting the free and clear property would provide more of a cash flow for you than the pool house. When you minus all of the expenses of renting the pool house, you will end up with less cash flow than renting the free and clear house. You have to take into account, Mortgage, Taxes, Insurance, Property Management, Vacancy Rates, Pool Maintenance, Money for unexpected expenses, lawn care etc. That estimated $400 passive income could very well be $150. Your free and clear property would probably be more like $500-$600.

Eric Delcol · Answer

Here is where a pool can be a benefit for a rental -if it's a common amenity such as in a condo. That way you are not responsible for the cleaning / maintenance / liability but at the same time you benefit from having that competitive advantage of having a pool.

Thomas S. · Answer

The pool house is a terrible rental property, Forget the fact that pools are a liability waiting to happen the fact is that it is a negative cash flow property.That aside if it's the home you want to live in go ahead if you think you will not find another one in the future when you are ready to move. You are buying a personal home not a rental property.The other one being paid off is also a poor rental property I would guess but since you do not say what it is worth it's only my guess. At $800 a month rent I can't see it being positive cash flow.

David Faulkner · Answer

No problem ... and sorry if I used too much REI speak. If you have specific questions or need clarification after chatting with your husband I'd be happy to help explain either in public forum and/or via PM. On the other hand, like anything else REI has its own language, and part of becoming an investor is learning not only the concepts and numbers but the language is well ... this becomes vital as you build your team of professionals and take on partners (remember, the bank is your partner too).

Holly Yankus · Answer

Thanks for the input guys! @Kevin Mika - We could do that, but we wouldn't be able to keep saving money the way we are now. Our current home is paid off and we are not insuring it (we live in a Flood Zone A and the house is not worth the cost of insurance - we are in Holiday). So if we move to pool home, we pay $1600/month for mortgage and get approx $800/month from renting out our current home (this will be all profit, minus renting and pm expenses, since we own it). In my (inexperienced thought process), I imagined saving more money by renting the pool home for $2000/month and staying in our current home. Then we could keep saving money at our current rate ($2000/month) and have approx $400 positive money from the pool house rent. Within a year, we would have much more money saved for acquiring a second rental property, move into the pool home, and rent out current home. If the pool wasn't a factor, would this be a good plan or am I crazy? I fully admit I need to do more homework on how to crunch numbers to analyze deals. I'm really glad I found this forum because I realize my husband and I are being very naive with all this. Thanks for your input @David Faulkner - You really lost me in that second paragraph though. I am currently in the process of learning the language of all this REI stuff. I have never bought a home before, but my husband has. He may understand your input a little better, so I will show it to him tomorrow. Thanks for taking the time to comment!

David Faulkner · Answer

The PM is right ... a pool is an increased liability and maintenance expense, and it will not increase your rent to compensate. When you buy a home with the intention of using it as a rental, you need to put your landlord hat on and look at it from that perspective, even if you intend to occupy it as your primary residence. I learned this lesson the hard way with my first residnece ... I spent all this money putting in a koi pond and it was beautiful and I didn't mind maintaining it when living there ... when I turned it to a rental I had to spend a bunch more money to remove it.Also, if you are only going to be $200-$400 over your mortgage with rent, then you have bigger issues. That property will be cash flow neutral at best after factoring in expenses and slightly cash flow negative is more likely. The only way I'd buy a pure rental like that is if I could build myself a substantial equity cushion through forced appreciation, much like a flipper would only hold after rehab ... then you'd have a solid appreciation return early and could likely improve cash flow that way as well. Then, if it is a nice neighborhood as you describe, it should be easy to manage as a rental with a solid middle-class family as tenants and rent increases should do some heavy lifting for you over the long haul if it stays nice and there is as a result significant rental demand.Otherwise, I'd wait until you are ready to move then buy your replacement property and move, but not before with those numbers. In this case, I'd consider either saving and/or doing a cash out refi on the current place (only enough so that it will still cash flow) and buy a fixer REO that doesn't qualify for financing or at courthouse steps for all cash, renovate, and move. This way, you get your forced appreciation equity bump same as described above. You can repeat by cashing out this equity later too ...