Newbie Considering Renting Out First House

[Brendan Ashton]

Hello everyone! I just stumbled on the BiggerPockets podcast and have loved what I've heard so far.

I need some help. We are considering renting out our first house and moving into another house we love in our same neighnorhood. Some numbers:

New house is listed for ~10% more than what our current house is worth. 

City is Riverton, UT

We estimate being able to rent upstairs and downstairs separately for a total that is $1000 more than our mortgage, before tax or utilities or anything.

We have enough saved for 6% down payment on the new house but could borrow more from family (we'd obviously pay them off first)

First off: is it even a good idea to rent out your first house? Is it legal? How do I go about figuring out zoning requirements and such? Would neighbors be able to put an end to the rental? We have great rappore with our immediate neighbors and would still be in the neighborhood, but don't want to risk being kicked out.

Second: What things should we take into consideration with this idea? Haha I'm such a newb. I'm scared by this proposition but the numbers (+1000 a month!) are making me feel like we should be brave.

[Aaron K.]

My guess is that your numbers are not really $1,000 per month.  It will be much more difficult to try and coordinate a roommate situation unless you are near a university etc.  Let's suppose that you can rent the home for $2,000 per month to one family which is the most likely scenario  I would budget 8% of rents for repairs another 8% if you plan on using a property manager so right off the bat that is $160 per month for repairs and another $160 for management I'll take a guess and say the home is $375k even if your tax rate is 1.1% that is $4,125 per year or about $345 per month.  I'll estimate insurance at about $600 or $50 per month and if you put 20% down and bought for $340,000 with 4% interest that would be about $1,300 per month in mortgage payment.

So 

$2,000 in rent

-$160 in repairs

- $345 in property tax

-$50 in insurance

-$1,300 in mortgage payment

So in this scenario your cash flow would be $145 per month and negative $15 if you sprung for a property manager.  Please correct my numbers as necessary, but do the real nitty gritty math before making a decision.