Dug Myself Into a Hole

[Account Closed]

Houston, TX. I decided to jump in and buy a house and now I feel like I have backed myself into a corner. I bought a single family house with a detached apartment for $250,000. I'm living in the apartment and renting the house. I am struggling to find tenants because they are uncomfortable with the landlord living on site. The mortgage with taxes and insurance are $2550 a month. I can get $2000 a month for rent. I would estimate my rent by myself would be $1000 a month. I've only owned the property for 6 months and the mortgage is killing me. I don't know if its worth it to keep or if I should sell and move on l. Would love to hear some opinions from the community!

[Joseph Cacciapaglia]

Why not hire a property manager to lease it for you? Then they wouldn't even know the landlord lives on site. Also, I've rented to people when I've lived at the property in the past. You might want to be sure that's the actual problem. Maybe there is something else you're missing.

[Bill B.]

Go with the property manager and then figure out what’s wrong with your loan and refinance. A $250k 4% loan with zero down is less than $1200/mo. Something’s very wrong at $2500/mo, especially if you put any money down or got the rate below 4% as an owner occupied.

[John Teachout]

I doubt the inability to rent it is because the landlord is on site. This is not uncommon. ie, half a duplex with owner in one side, etc.

You're probably overpriced for the unit's location, size or amenities. And if someone actually doesn't want to rent from you because you're close by, you don't want them as tenants.

[Luke Reninger]

I would hire a property manager as well. They can tell you about other issues and be a buffer. 

[Joe Villeneuve]

Sell it and move on...before there's nothing to move on with.

[Scott Weaner]

Why is your mortgage payment so high? What is the length of your mortgage? A 30-year would not be that high.

[Casey Powers]

Originally posted by @John Teachout:

And if someone actually doesn't want to rent from you because you're close by, you don't want them as tenants.

Disagree. Perfectly valid reasons for not wanting to live next to the landlord. Most obvious being the landlord being able to easily get too much into your business. No thanks.  

[Account Closed]

Originally posted by @Account Closed:

Houston, TX. I decided to jump in and buy a house and now I feel like I have backed myself into a corner. I bought a single family house with a detached apartment for $250,000. I'm living in the apartment and renting the house. I am struggling to find tenants because they are uncomfortable with the landlord living on site. The mortgage with taxes and insurance are $2550 a month. I can get $2000 a month for rent. I would estimate my rent by myself would be $1000 a month. I've only owned the property for 6 months and the mortgage is killing me. I don't know if its worth it to keep or if I should sell and move on l. Would love to hear some opinions from the community!

 You can't afford a property manager.  Just don't tell anyone you're the owner.  Lots of owners do that.  Just say you manage it for the owner. Maybe you're coming across as having too many rules?  I think a lot of new landlords are trying so hard to do everything right, that they forget what it's like to be the tenant.  Rules are good, just make them standard ones that other good landlords are doing.

An example of what not to do: don't say you're going to do quarterly inspections (only do inspections every 6 months max and just say it's to change smoke detector batteries and check to see if there are any plumbing leaks and you're in and out in 5 minutes).  Don't put up with craziness, but otherwise leave them alone.  Be available, but not in their business.  Don't sweat a cluttery house, if it's not food that's attracting roaches.  There are lots of messy but basically clean tenants who are great tenants, for instance.  Don't micromanage their lives or they'll leave.

[John Warren]

@Account Closed I am going to be the contrarian here, and tell you that you are probably over priced. As a realtor and an investor, I look at pricing on a sliding scale. I bet you were using single family homes as your rental comps, but your potential tenants show up to see a house with an apartment on site. They are not pleased at that price point to have you there, so they look elsewhere for a true single family home. Instead, you should look at comparable apartments as far as bed/bath count. If you price the place at $1800 will it fly off the shelf? Don't get fixated on how many dollars per month your spread sheet said. Get a good, qualified renter in there and move on to the next part of your life. 

[Andrew Taylor]

What @Account Closed said. Never identify yourself as the landlord or owner. You're just a guy renting an apartment. I don't know about the $2500 payment; that does seem high, even with the stupid-high property taxes here. I can only reasonably get the monthly nut up to about $1,900 even with taxes, insurance and HOA dues. Maybe you can refi?

What part of town is the property in? Demand for rentals is going up, not down, so it seems like maybe something else is the issue here.

[Nathan Gesner]

I think you're over-priced. Demand is still high for rentals but you're probably in the price range of a single-family home wherein the renter has access to the entire property. Since you're living on the property in an apartment (owner or not), the price should be lower.

At $2,000 a month, you've lost $12,000 in rent income so far. Drop the price! I've seen people rent walk-in closets as their living space so anything will rent if it's priced appropriately.

As others have pointed out, your mortgage numbers don't make sense. You should be paying around $1200 a month. That's the price of a decent apartment so you'd be paying that to live somewhere else. Why are you struggling?

[Matthew Irish-Jones]

@Kyle Fadness. I’m not sure the reason it’s not RE to f is because the landlord lives near by. That really should not even come up in conversation.

You own the place, show the unit and tell them you are the owner. No need to explain to anyone where you live.

Seems more likely your priced too high. You can consider reaching out to a PM company or a local agent and offer a loading fee if someone can find out a tenant. My guess is price is more of an issue than where you live.

[Alecia Ashby]

@Kyle Fadness

I had a friend in the past tell tenants that lived in his building that he was also renting and run rents through an LLC or Corp so the checks aren't made out to you. Might be worth a shot!

[Henry Lazerow]

That's strange. With my building all the tenants were happy I lived on site as meant I would actually take good care of the place and handle repairs quickly. Maybe it's the way you are phrasing it, try changing that around.

[John Morgan]

I would sell that thing. Nobody will want to rent it with the landlord on property. Now is the best time to sell. Buy something cheaper with the money and look for something to rent in a higher demand rent range of 1300-1600/mo. Good luck!

[Casey Powers]

I also have to agree it’s probably overpriced. If there is one single mistake I see inexperienced landlords make the most, it’s pricing the rental too high and then sticking to it for too long, losing thousands of dollars in rent. If a property is even half decent, someone will rent it if it’s priced right. 

[Theresa Harris]

I agree with the other poster who asked why your mortgage payments are so high.  On a $250K property, they shouldn't be $2500 a month.

[Jason Rutledge]

@Kyle Fadness have an agent rent it out for you. Most will assume your just another Tenent

[Greg M.]

As mentioned, your payment numbers are out of line. Based on the info in your profile, it looks like you put 5% down. The only way I can get to a $2550 payment is with 1% PMI, a 5% interest rate (you'd have to have really lousy credit), and a 15 year fixed. Is this what happened?

If marketed properly (clearly that there are two units on the property), very few people looking at the place would care that someone, even the landlord, lives in one of the units. I find it hard to believe that people would tell you that they aren't interested because the landlord lives on the property. They could pick any excuse or none at all, but to say that it is because of the landlord living on site and saying that to the landlord is strange. 

As mentioned, the price is likely too high. Lower it a couple hundred dollars and the pool of potential renters expands greatly. And if people did mention landlord on site being the problem, perhaps it's not that the landlord is on site, but that you are the landlord. Perhaps there is something off-putting about you or how you speak to them. Maybe it's best to rent both places out and you live off site? 

[Account Closed]

Being my first post I didn't expect so many replies, thanks everyone I appreciate it a lot y'all are awesome! Most comments have been about the mortgage payment. I bought this before discovering BP but I wanted to dive in. I put 5% down and have a conventional 15 yr mortgage with a 3.375% rate at $1688 a month. TX property taxes are insane so my escrow is $847 a month. About $200 for insurance and $50 for HOA, rest is property tax. On top of that is $60 a month for PMI.

[Jim K.]

@Account Closed

That sounds more like a palace. Houston TX median per capita income is $32,996/yr. I'd sell it and look at the bigger, more robust local rental market to get your feet under you. I'd be targeting rentals in the $700-$1200 range in your area. But that's what I know, and moreover what I know about Pgh PA. Your mileage may vary.

[Account Closed]

$60 a month for PMI. It seems crazy high and thats why I'm really starting to question it. Thanks everyone!

[Herly C.]

@Bill Brandt

Is taxes and insurance(escrow) included in that $1200/month? He may be factoring those 2 expenses in the $2500/month as the overall monthly cost of the mortgage.

[Bill B.]

@Herly C.

they aren’t. But on a $250k property insurance should be max $600? ($50/mo) and property taxes very very max $2400 (More likely $1600?) just for round numbers ($200/mo)

So you’ve got $1200 plus $250 for Taxes and insurance is $1450/mo. Waaay short of $2500/mo. Someone’s stealing a thousand a month, more if he put any money down. 

[Michael P.]

Get a gf move in w her, rent all the units.