Moving out and leaving mother in law behind!

[Chris Noles]

This isn't a bad country song, but now that I have your attention I really do have a question. :)  I previously posted a question in the Deal Analysis forum asking for opinions about whether or not my current home will cashflow well.  My wife and I have found a new primary home, and we will be moving into it next month. My mother in law currently lives with us, but she will not be moving with us to our new home.  I love her to death, but trust me, this is a good thing!  She is still in good health, and she earns enough pay to pay about $400.00 per month in rent.  We are thinking if she is going to have to start paying someone rent, it might as well be us, right?  Well, that is of course if she has roommates who can pay us enough rent combined in order to help us cashflow properly.

The house is a 4 sided brick ranch home that was built in 1969. We just spend nearly $50K in rehab which included a new breaker box, remodeled both bathrooms, retiled kitchen floor, retiled screened in porch floor, replaced cast iron plumbing with PEX and put in a french drain.  unfortunately, we will be making payments on this personal loan for the next 7 years unless we pay it off early.  The home is on a full basement, but it is mostly unfinished.  No bedrooms, just 2 small offices (no closets or bathroom).  The living space upstairs is about 1700 sq. ft. with 3 bedrooms and 2 bathrooms with a 2 car garage.

The home could list for around $200K, and we owe $140K on the house. The interest rate is 4.25% so our monthly mortgage payment with tax and insurance is around $1,300.00 with 22 years remaining. 

The homeowners on both sides of our home have decided to rent their homes out, and the rents seem to be in the range of $1,400.00 to $1,550.00 per month in our area (Mableton, Georgia).

In the next 30 to 60 days, we will decide to do one of three things:

1.) payoff the mortgage and get the equity and mother-in-law will just go pay for a room for around $300.00/mo to another landlord.

2.) Mother in law will stay as a $400.00 per month tenant, but we will need 2 other tenants who can pay at least $500 to $550 per room to help us cashflow.

3.) Mother in law moves out to pay $300.00/mo to another landlord and another tenant will pay the full rent (hopefully around $1500.00/mo) 

We are new to investing, so if we go with option 1 we will not be landlords right away as we will have to invest somewhere else at another time.

Option 2 feels more like a multi-tenanted or house hack situation where we will have to collect from 3 different tenants.  If we go with this option, should we do a full service lease to include utilities (at least WIFI?) Of course we would not have separate meters to track how each tenant utilizes utilities so that could be challenging, but at least mother in law would be here to keep an eye on things and she will of course pay and be sure the home doesn't get trashed.

Option 3 may be easier to manage just one tenant and they could pay utilities, but we won't know what kind of tenants we may have.

In any case, I feel better about having a property management company help since my wife and I will be an hour a way and I don't want the calls at 3AM if something goes wrong in the house.  

We cannot refinance this house to lower our monthly payment since we are purchasing a new home, and this home will not be our primary. I have been told that since we already own this home, and the interest rate is not too bad for a rental property it might be a good way to easily work our first SFH deal and provide a place for mother in law to live.

What do you think?  It seems that home values are holding right now, but of course I am concerned about not selling for a good price right now while I can.  Long term (5 years or more) renting seems like the best option though.

Thanks for your feedback!