Sunday, November 05, 2006

To sell or not to sell, that is the question

In our quest to find a new home we have come to this important question.  Should we sell this place, or keep it as a rental?  When we bought this place we said from the beginning that when it comes time to move we would love to keep this as an income property.  The way I see it, since it's brand new the repairs and maintenance should be very little if any for at least a few years.  And the equity we gain over the course of our children's lives with us would be more than enough to then sell and use to pay for college.  A very simple college plan if you will!  It's not a sellers market right now anyway, so keeping this would make that a non-issue and we could move as soon as we find a renter, cause the market is flooded with houses that would work for us right now.  It's a buyers market, so not only could we gain from this property, but we could get what we want for a lot less than even a year ago.
But like all good ideas there is an amount of risk involved.  And that is where we start to lose confidence.  What if we get a renter that trashes the place?  What if a lease ends and we can't get someone else to rent?   What if no one wants to rent it in the first place?   We have savings, and we would continue to add to that once we rented, but what if it remained un-rented for so long that we emptied that?  Crying and gnashing of teeth for one!
But if we get good renters, people that are respectful and pay the rent and renew their leases.......it would just be perfect!!  We wouldn't have to think about college again, for either of the kids.  To know we already have that secure when they are less than 3 years old would be so incredible!
I think the key to good renters is being a good landlord.  Which we would be.  We would live close enough that things could be looked at, fixed, whatever, pretty much immediately.   Someone suggested to me that you should only rent a property if you plan to manage it yourself, drive by it weekly, and pick up the rent in person on the first.  That way you are keeping tabs, you are on top of any maintenance that needs to be done, and the renters know they won't be able to get away with anything.  Sounds good to me.  I know I can handle that.  Since it's only one place it shouldn't be an ordeal to come by on a regular basis.
The first step of this process is to refinance.  We started that process this weekend.  Once we know where we stand with that we will have a better idea how to proceed. 
So my friends, any words of wisdom on this topic?   Real estate is such a great investment, it's hard to not do this.   Yet I worry about messing it up and having the bank seize both our houses and leaving us out on the street. 

5 comments:

Chris said...

Make sure you have enough in savings early on that you could go for about 4 to 6 months and make both payments if you had to. Figure that if you get a renter to sign a lease, you have a year to make that savings goal a reality. Your condo is in a growing area that I wouldn't think it would be too difficult to get a renter at all. I don't see the economy in Parker changing any time soon. It's always a risk, just make sure it's a calculated risk. If you know any more landlords in the area, talk to them as well.....oh, and happy aniversary you big liars....("oh we're going to the mountains.......")

lisajo5 said...

I wish I had advice, but since selling and buying a new house almost caused a nervous breakdown for me, I will abstain from giving advice. Good luck, I know you will do your homework and will make the right decision. Can't wait to see pics of the new house.

The Mama said...

Chris, it's so funny you mention us "going to the mountians". I was telling James on our anniversary that I remember the day we left was the first time I ever talked to you. He couldn't remember but I do, you called him while we were making our way west on I-70. Up til then you were the just "guy in Indiana". Then you came to my dads for Thanksgiving and I got to meet you. So funny!

Thanks for the advice too, we figure 6 months of back up rent which would double as repair and maintenance money. Once that is stashed we can start putting money on the principle every month to pay it down quickly.

I hope you're right about getting a renter. I don't think it will be too hard either. This is a nice area and the house is brand new which I hope will be a big draw.

Michelle said...

renting sounds like a great idea. i agree that it can be risky, and you definately would need to have some savings set aside.

i think a really good lease would help you feel more secure.. make sure you get first and last month's rent upfront, and maybe a damages deposit as well (which they get back if they don't trash the place!). have it written in that the renter is resposible for any damages (other than normal wear and tear).

i hope you guys figure out what to do.. it seems like such easy money.. you just sit back and collect rent. but risky too!

Brandi said...

Hey, if it were the right time and place, we'd rent from you! I'm Brandi, Felicia's friend from Northland she told you about. I think she even commanded us to have a play date! We're living in Denver now if you ever want to get together! branflakes@gmail.