Originally Posted by dah328
G's question got me wondering about residential rental property, something I've considered off and on for a couple years. Where I live, there is decent rental demand and the monthly rental rate is roughly 1% of the purchase price of the property so more than would be required to cover a mortgage payment, insurance, and small-to-medium maintenance expenses on the property. The value of the rental property itself is unlikely to either appreciate or depreciate much. What other kinds of things factor into evaluating the investment value of residential rental property?
For what it's worth, I was told the 1% number when I got in touch with the agent who sold me my house, and it's looking like that's completely off. I'm looking at more like 0.7%, though it may turn out to be a little higher or lower when I get someone out to give me a better feel for what it should fetch on the rental market.
Originally Posted by brokencycle
As someone else said, you can get a service to do most of that stuff. Around here there is renter's warehouse.
I have a couple friends who to it. One winds up losing about $100/mo on rent compared to mortgage/expenses, but they're happy doing that over taking a bath. Don't forget though that you can depreciate your house, so you lose the homestead but get the depreciation.
I'm leaning toward a service. I started looking around more thoroughly yesterday than I had been, and there are some good options out there. I'm not thrilled about giving away cash, but it will be nice to have someone who works as an intermediary. Plus, they'll be able to market a lot better than I will, especially given I won't be in the area. Even if that only means it rents a month earlier, that will be worth the fees.
I may end up taking a small loss, though, based upon the ballpark numbers I have, it's more likely that I'll just break even. Still that's better than the alternative, and I'm gaining the equity the renter is paying for me.
Yeah, losing the homestead isn't great, but you're right about the depreciation. Plus, I can write off any loss, and all of the costs associated with it even if I'm not losing money (interest, taxes, etc.).