Seeking advice on renting out my home with limited landlord experience

[Felipe Manoloff]

Hi all,

I’m hoping to get some advice from those more experienced in real estate and property management. I have only owned  a home in Texas for 1,5 years, and my family and I may be relocating to another state within the next 12 months. Instead of selling the house and losing a significant amount to closing costs, so we also considered renting it out.

The challenge is that I don’t have much experience as a landlord. I’ve already reached out to a few property management companies, and while they would handle most of the responsibilities, they’ve informed me that we’d likely rent the property for $500-$600 less than our mortgage payment. Additionally, the management companies would take around 10% of the rent for their services.

Given this, I'm exploring whether it would be a smart move to refinance when interest rates drop, and possibly form an LLC to transfer the property into. I'm thinking this could help us with tax deductions, especially if we operate at a loss.

Does anyone have experience with a situation like this? Are there specific pros and cons I should consider when it comes to refinancing, forming an LLC, or even continuing with the rental given the negative cash flow?

Any advice or recommendations would be greatly appreciated!

Thanks in advance!

[Taylor Dasch]

Its really not that hard, the main thing is selecting the right tenant. Be sure to use a good background check and go through it - I use smartmove but there are a lot of different ones and I think BP has one as well. I think renting it out is the way to go if you will cash flow well from it. But if your going to be losing 500-600 / month, it may be better to sell the place. I think its definitely feasible to manage yourself if you just have the one property, it may be slightly more difficult from out of state but you can definitely still make it work. But I wouldnt continue with the rental if it is negative cash flow. 

[Drew Sygit]

@Felipe Manoloff first off, who told you moving your property to an LLC will help with tax deductions?

Not true, but don't believe me or anyone else, go find the answer from qualified tax professionals!

If several PMCs are all giving you roughly the same rental amount, then it's probably a correct number. What does paying them 10% for their services have to do with this?

You've obviously read renting out properties is easy and profitable - but, have you looked at when the material was published? 

Have you tried to understand the basics of rental investing?

If you're only looking to avoid doing your own research and instead expect someone to magically give you all the answers - SELL!

You will NOT succeed unless you put a LOT of effort into learning the basics.

[Felipe Manoloff]

[Adam Bartomeo]

First of all, Property Management Companies don't "take" 10% they earn it! They do a thankless job for pennies and are expected to work 24/7/365.

You should sell the property and move on to a property that makes investing sense.

[Matt Solis]

Where is the property located? Have you looked into converting to a mid term rental? If it's in a good location, and the property is in great condition, you could furnish the house and operate as an MTR. There are companies that can do this for you.

Having the property in your name will not stop you from taking a loss on your taxes, you don't need to move it to an LLC to accomplish that.