Renting out your home for one year

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simplesimon
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Renting out your home for one year

Post by simplesimon »

My parents own a second home by me (a small 1br/1ba apartment in a 50-unit building with elevator and a garage parking spot) which they use to visit for 3-4 months at a time. They told me due to other vacation plans in 2025 they will not be back until some time in 2026 and asked if it was worth trying to rent it out for a year.

Since I don't have any experience with rental properties I wanted to see what Bogleheads thought. There's no mortgage on the property, so rental costs would well exceed the property taxes, utilities, and HOA fees. But I imagine there's the need for increasing property insurance, the time and effort to take down/store personal belongings and putting them back up again, changing name on the utilities back and forth, my own time and effort managing the tenant (my parents would not do this, I could outsource to a property manager, which obviously cuts into profit) etc.

Anything else I am missing when considering if its worth it to just rent out the unit for a year? The HOA rules do not allow for short term rentals.
Last edited by simplesimon on Tue Nov 19, 2024 1:13 pm, edited 1 time in total.
jebmke
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Re: Renting out your home for one year

Post by jebmke »

It might complicate their tax return preparation since they will need to file Schedule A as well as the depreciation schedule (I don't recall the form number).
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Watty
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Re: Renting out your home for one year

Post by Watty »

simplesimon wrote: Tue Nov 19, 2024 12:58 pm Anything else I am missing when considering if its worth it to just rent out the unit for a year? The HOA rules do not allow for short term rentals.
There may also be restrictions on long term rentals. A potential problem is that if more than a certain percentage of units in a building are rented then future buyers may not be able to get a conventional mortgage because of loan rules which can make it very difficult to sell a condo. To prevent this it is common to have restrictions on the number of rentals so that even if other units in that building are rentals it does not automatically mean that you can rent yours.
InvisibleAerobar
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Re: Renting out your home for one year

Post by InvisibleAerobar »

simplesimon wrote: Tue Nov 19, 2024 12:58 pm My parents own a second home by me (a small 1br/1ba apartment in a 50-unit building with elevator and a garage parking spot) which they use to visit for 3-4 months at a time. They told me due to other vacation plans in 2025 they will not be back until some time in 2026 and asked if it was worth trying to rent it out for a year.

Since I don't have any experience with rental properties I wanted to see what Bogleheads thought. There's no mortgage on the property, so rental costs would well exceed the property taxes, utilities, and HOA fees. But I imagine there's the need for increasing property insurance, the time and effort to take down/store personal belongings and putting them back up again, changing name on the utilities back and forth, my own time and effort managing the tenant (my parents would not do this, I could outsource to a property manager, which obviously cuts into costs) etc.

Anything else I am missing when considering if its worth it to just rent out the unit for a year? The HOA rules do not allow for short term rentals.
Some HOAs have a percentage quota when it comes to rental units. So before you proceed further, check to see if there are any such limitations, and if there are, whether the quota has been exceeded.

Also, I don't know where you reside, but renting right now may be very difficult in certain parts of the country (think colder climates). Depending on market conditions, a renter might not move in until Spring 2025.
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simplesimon
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Re: Renting out your home for one year

Post by simplesimon »

All good considerations so far, thank you.
random_walker_77
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Re: Renting out your home for one year

Post by random_walker_77 »

Doublecheck the insurance policy. If no one's living there for a year, the coverage you're paying for may be void as most won't cover unoccupied properties. The ones that do are a lot harder to find and cost more.

Rentals include costs, but your extra costs are probably a lot less than the rental income
* storing possessions (couple hundred per month?)
* movers to move things to storage and back ($1K per round trip?)
* property manager fees, or equivalent in labor
* tax prep & accounting (< 1K /yr?)
* accelerated wear and tear

risks:
* HOA permission to rent?
* tenant causes damage
* tenant stops paying
* tenant won't move out / lengthy eviction process
* tenant is disruptive to neighbors
* running afoul of landlord rules
Hebell
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Re: Renting out your home for one year

Post by Hebell »

I wouldn't do it for such a short time. The chance for damage to your property, and real or frivolous claims against your insurance, isn't worth it for a one-year rental, unless you absolutely really have to have the money.
Hebell
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Re: Renting out your home for one year

Post by Hebell »

And don't assume that you can feel comfortable just because somebody has a really good job and longstanding stable family history.

I had a nice couple, and the husband was a responsible first responder in the community, wife was the chief of cafeteria services in the education system. They divorced, wife got a boyfriend who used drugs, and I got a lot of damage to the home when the the wife and her boyfriend trashed it before being evicted.
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mrmass
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Re: Renting out your home for one year

Post by mrmass »

Is the place in a pro tenant or pro landlord state?
557880yvi
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Re: Renting out your home for one year

Post by 557880yvi »

You post does not say that it is age-restricted. A possible rental would be to a grad student if you are near any educational institutions. Many foreign students come for a year program and you could list through the university housing office. You could rent it furnished. This would be your best and easiest bet. I have worked in higher ed for many years and never heard of any of our grad students (US and foreign) ever giving any of the local rental owners any problems. Many of the foreign students come from very wealthy families and their parents pay the entire year's rent up front.
ginrummy
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Re: Renting out your home for one year

Post by ginrummy »

Hebell wrote: Tue Nov 19, 2024 1:43 pm I wouldn't do it for such a short time. The chance for damage to your property, and real or frivolous claims against your insurance, isn't worth it for a one-year rental, unless you absolutely really have to have the money.
I agree with this. If it's the start of a long-term relationship with you as the landlord, it might be worth giving it a shot. Otherwise, it’s probably not worth the effort. That said, if you’ve never done it before, it could be valuable to gain the experience.

I’ve done this myself and later moved back into the unit. I had positive experiences with both sets of tenants, but I’m not looking to do it again.
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celia
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Re: Renting out your home for one year

Post by celia »

What if they don't move when the year is up?
* Another lock-down when an epidemic occurs (this really can happen :oops: )
* Their new place won't be ready on time
* They are taking advantage of local rental protections (if any)
* They are mad at the owner for whatever reason so want to take advantage of the situation

The cost to evict them might be more than all the rent collected. Meanwhile, if your parents have to rent a storage locker for their furniture, that will eat into their profit.
knightrider
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Re: Renting out your home for one year

Post by knightrider »

Minimum credit score: 720

That eliminates 99% of the riff-raff who will play an inexperienced landlord like a fiddle..

Other obvious requirement, no smoking, no pets. Income to rent ratio > 4, preferably 5+ .

Ignore anyone who doesn't meet these requirements.

Price it slightly below market value so you have a big pool of quality people to choose from.
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simplesimon
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Re: Renting out your home for one year

Post by simplesimon »

mrmass wrote: Tue Nov 19, 2024 1:49 pm Is the place in a pro tenant or pro landlord state?
I had this thought - MA which I believe is pro-tenant.
pshonore
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Re: Renting out your home for one year

Post by pshonore »

jebmke wrote: Tue Nov 19, 2024 1:04 pm It might complicate their tax return preparation since they will need to file Schedule A as well as the depreciation schedule (I don't recall the form number).
And they'll probably need Schedule E to report the rents received as well as other expenses.
random_walker_77
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Re: Renting out your home for one year

Post by random_walker_77 »

simplesimon wrote: Tue Nov 19, 2024 2:30 pm
mrmass wrote: Tue Nov 19, 2024 1:49 pm Is the place in a pro tenant or pro landlord state?
I had this thought - MA which I believe is pro-tenant.
Even in a landlord-friendly state like Texas, you have pretty strict limitations on tenant screening. If you have one rental application and it meets your written (required) screening criteria, you need to rent to them:
https://www.poplarhomes.com/rental-prop ... landlords/

That means that credit score and income ratio is about all you can go on, assuming that you're disqualifying criminals and the previously evicted.
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