All Forum Posts by: Brandon White

 @Brandon White

What I would tell you is that now is the best time to sell your property if you were thinking of going that way.  It’s fresh, no wear and tear, etc and the market is high right now as to home prices, etc.

I think you need to ask yourself if you want to be a landlord or not.  Just beause the house dropped in your lap doesn’t mean you have to go that direction.

If you do want to be a landlord, it doesn’t have to be with that house.  You could cash out, buy a cheaper house using just 1/4th of that money (financed) and have options with how you utilize the rest of those funds.   If you really got into rentals you could buy 4 of them for the money you have tied up in the one you inherited.  If you run the numbers you will make far more money with 4 than the one you currently hold - even financed.  Plus you get depreciation on 4 as well, as well as market appreciation on 4 - which long term is where you can make a lot more money.  We have 37 doors that we bought between 2018 and 2021.  The have pretty much tripled in value in 6 years.  In retrospect - great timing!  But even at 3-5% market appreciation - which is more the long term norm, that is $3,000-5,000 a year increase in value.  If you owned 4 - $100,000 properties - that is $60-100k in market appreciation in 5 years.  It’s way better than 5% on your money in the bank!… but takes effort to run the properties, etc.  

all the best!

randy 

@Brandon White

There is a lot to unpack there.  

First - realize that AirBNB usually makes a lot more money than a long term rental (based on having a good occupancy rate <# of days rented per month>) ... but that all comes with the responsibility of continuous turn-over - where you likely need a cleaning service, etc as a support staff - unless you are going to do that yourself.

Second - When looking at renters - the reason many renters rent is that they DO have poor credit scores.  So in my opinion a credit score isn't the greatest indicator on a renter.  It's definitely an indicator - but unless you are dealing with a white-collar person who just doesn't want to own a home - it's more common than not to see a lower credit scores.

I'm not a huge fan of out of state renters.  You can often miss the bigger picture there.  The bankruptcy tells you something about their finances - that they had issues at least at one point.  I would try to look them both up on the county clerk's office website for the county they report to live in... and maybe a few of the surrounding counties.  You can see felonies, evictions, drug offenses, etc. by doing that.  It gives you perhaps a more thorough view of the type of person they are. 

Wanting to move "immediately" is often code for "We are about to be kicked out / evicted from where we live, so we desperately need somewhere to go."  I would definitely want to know about their future income.  If they are moving out of state - do they already have jobs lined up?  If they are operating under the "We'll figure that out once we get there" approach - that is a bad sign.  One of the big things we use for qualifying tenants is their income.  We usually want to see 2.5 - 3x their income as compared to the rent.  So if you were renting the unit for $1,500/month - we would look for income of $3,750 to $4,500 at a minimum.  This is pretty much how banks do things too - the idea is that not only do you have to afford your rent - but also your electric, your food, your car, your insurance, your gas, internet, etc.  You also want it to be VERIFIABLE income.  Paystubs and double check it with their employer.  If they were down at the 2x income level, I would almost consider that disqualifying by OUR standards.  There just isn't enough income left to make someone's world go round.  This later translates to - We decided to pay the electric bill, instead of our rent.

As you sort of infer - we look at mitigating risk by how much security deposit we require.  The more iffy we are, the more deposit we want.  I can tell you that 3 kids can do a number on a house - especially if you add in a dog as a 'bonus'.  We find our units with kids need far more rehab at turn-over when there are kids involved.  Think crayons and dirt smudges on walls, spills on carpets, etc.  I would say First and last month's rent, plus a matching security deposit that is equal to the rent.  So if you were renting it for $1,500/month - that would be $4,500 to move in.  That puts you in a pretty secure place.  It can be harder for people to come up with though... so it can cut both ways.

As for rental rate - try going to rentometer.com and put in your rental address and see what it tells you it thinks the rent should be.  Just like with appraising a house, you want your rent to be close to the rents of the properties surrounding it - so that you aren't under-renting your property.

You mention "paying the bills every month" and that it's a newer house - but you don't mention whether it is financed or not?  If so, given everything you have described - another option might be to cash out of it and take the money and run.  Sure - this is bigger pockets - so if you are interested in being a landlord and such - great - but it doesn't really sound like that interests YOU that much from your "migraine" comment.  So I would ask yourself, who is it that is up for this?  

You could always start off one way, and then go another.  I sort of lean your direction and say, "Why don't you try the AirBNB for a couple of months - see how you like it - and then reassess.  You also need to verify the requirements of the city you live in as to AirBNB and such.  Some cities require permits and have other restrictions, etc.   If the constant turn-over bothers you, but you like the idea of rental income - maybe the long term rental is the way to go.  Or maybe you decide that, "This is not my gig" and you bail out and sell the property.

Hope it helps a little!

Randy  

If the relative left it to her, it is up to her to decide what she wants to do with it.  If I was her, I'd sell it and put the money in a high yield savings account. With the current interest rates, it is a lot less work than a rental and she'd probably make about the same (if not more factoring in property taxes, insurance and repairs).  My mom sold her house and downsized and rather than buy a rental, she put the money in a savings account.