Advice, Sell or Rent

[BMC John Phillips III]

Ok, I am seeking the wisdom of the mess here.

I have orders to Key West, where buying is out of the question (for me at least) and I will be living in govt housing. I own (mortgage) the house I live in now (in Texas) in an area that is growing faster and faster each day. My house is already worth more than I paid for it 1 year ago (not to mention improvements I made - it's also brand new). I am debating renting it out while I live in the Key West so I can build some more equity and not be throwing all of my BAH away.

There are obvious concerns for me such as finding a good renter and repairs and such. I was just curious how many Chiefs out there are doing or have done this and what your experiences or advice might be.

thanks in advance, JP3

[MKC Art Bailly (ret)]

John A few years back I was in kind of the same Situation. I had been in my house for a year when I received orders to my new unit. I chose to keep my house and manage the rental myself. I have a duplex with a four bedroom on the upper 2 floors and a 2 bedroom apartment on the lower floor. The four bedroom was rented out before I transferred and the same couple was there 4 years later and keep really good care of the house. The 2 bedroom was a nightmare. I had 2 really bad renters and 2 good but the bad renters left in the middle of the night owing about 6 mounts rent total and I spent around $2500 in materials to get it back to livable conditions. I finally left it open until I could get back to it and keep a closer eye on it. I guess when it comes right down to would I do it again I would say yes but I would defiantly do it differently. Instead of managing it my self I would rent it out thru a property management agency that in the same town. Even they take a part of the rent as their fee you would have someone that is right there to collect the rent for you and take care of the problems that come up. I did it myself and would have to travel to go fix/repair things and try to collect rent, and when a tenant moved out my I would have to go get it ready to rent out again and then my wife would go and do the showing of the house and conduct interviews. The area where I went wrong in the past is credit checks. I would highly recommend you do credit checks. I also like renting to Coasties. Even if they do damage or not pay rent on time you know how to get a hold of them or their supervisor. Be firm and don’t bend to much. NO pets means no pets. I have herd many arguments why I should let them bring their pet into my house and from past experience I don’t allow it. I had to replace all the carpets when a tenant had a cat without me knowing (until I saw it sitting in the window and I knocked on the door and evicted them). The odor in the apartment was unbearable. I had to remove the carpet, carpet pad and paint the floor with Kills to get rid of the stench and instead of putting carpet back down I put Prego hardwood floors down. I also keep my house because I planed on moving back in. I took almost 5 years but I’m back in it and not moving again. Was it worth it for me? Yes
If you would like to here more feel free to call. I have plenty of horror stories to tell about low income renters. For anyone in Alaska, stay away from KIC renters.
Just my 2 cents

[BMCM Deane Smith]

John...If you know that the market is heading up and will continue to do so for awhile, I'd say hang on to it. If you do keep it, I would have a rental management company take care of it for you. You can continue to watch the market and sell when it's right. Real estate is the best investment to have.

If you doubt that the market is going to go higher...Sell and take what profit you can now.

My home has increased in value by 62% in 3+ years. It won't go any higher, so we're walking away with a nice profit and will roll it all into our next place.

Also...I wouldn't recommend taking the CSB. Unless you have plans to use the money for a long-term investment, it's not worth doing. You're just taking a loan on your own retirement...so be very cautious.

[BMC John Phillips III]

Thanks for the advice on both accounts.

If I do decide to rent, I will likely use a rental manager. I am still debating whether or not it will be worth it for me. I don't want to have to worry about it all the time, but at the same time, I don't want to throw away my BAH.

I bought this house brand new in July of 04 and they are continuing to build in this neighborhood. The houses on this block sold lightning fast and now they are asking about 10K more for the same houses on the very next block. So I have to think my value has gone up. Not to mention I put in a pool and a deck and a lot of other things that a brand new house doesn't come with.

Something I would love to do is arrange a govt lease contract and have military families live here. I have heard of other people doing this and that you can now do this even if you are AD, anyone know more about it?

ps BMCS D.S., you think we should start a thread on the CSB?

[BMCS Shawn Vredenburg]

If you rent it out, you gotta do full credit checks. Check out the National Association of Independent Landlords (NAIL). Members can run credit checks on folks.

I have rented out my first house for 18 months now (to two different families), and it's worked out well. First family had really bad credit, so I required a double security deposit. They were pretty good. 2nd family is a CG family and also seem to be doing great.

Just don't allow cats! You can't get that damn smell out for anything.

Meanwhile, property values continue to skyrocket. I will either sell or refinance this house when I retire to pay for grad school.

[ASTC Ronny German]

Selling or renting out your property is a very personal choice. I can only speak for myself, but when it came time to transfer, I stood to make quite a bit of money if I sold (double the price I paid for it four years ago). The problem is that I want to retire in that area, and if I sold, I probably would of sold myself out of the real estate market in that area (because now I would have to buy at a much more inflated price and probably get a less desireable property). Because I bought when the prices were low, and the rent in the area sky rocketed, it was a no-brainer for me to keep it. I currently manage the rental myself (Coast Guard member), and hope to move back into it as soon as I retire or transfer back to the area.

[AMTCM John Long]

We've been renting our house out in Traverse City since 1998. A couple thoughts from past experience.

1. Once you leave consider it a business venture. Loose the emotional ties to it. We were told that and it's good advice. Otherwise you'll panic/get upset everytime something happens to it or needs repair.

2. We've had 3 renters total. First ones were an older couple. Stayed in it for about a year. Second was a guy who just started a divorce process (be careful with this situation!). He decided to get back with the wife a couple of months later. Left the place a mess, old pet food laying around, skipped out on the rent, all around deadbeat. The current couple has been in ever since. Only had small probelms with them, nothing big. We chose to keep the rent low so they will stay in it. Less hassle of finding new renters all over again and we like the peace of mind of having the same folks there.

3. Our neighbor across the street, a retired DCC, is our property manager. Works out good.

4. Prior to leaving we worked out who in town would do any repairs that needed fixing. For example, septic, carpentry, heating, plumbing, etc. Again, peace of mind and continuity using the same folks each time.

Good luck.....John

[BMCM Stuart S. Slesh]

The bottom has got to fall out of the housing market eventually. Greenspan keeps saying the the job market can't support the rising costs of housing. If the area that you'er in can still support the growth, you may want to roll the dice. It may be a back up plan in case that lottery thing doesn't work out for you.
I would agree with what everyone has said so far about paying a professional to handle the renters. And I personally would only rent a house that I was using as a business venture, never the one I was planning on retiring in. I couldn't release the emotional attachment that I would have created with the home I plan on retiring in enough to allow someone else the opportunity to destroy it.
I too, have many horror stories of renters gone bad, but if you plan on renting, never under any circumstance, watch the movie Pacific Heights. The stress that you create wouldn't be worth the rent that you're making.

[BMCS Jim Madsen]

I have a degree in real estate and think that with the rising intrest rates, this is a great time to rent a home that you own. People that would otherwise buy are being forced to rent more and more. I am not familiar with your particular market, but it sounds like you may have a good thing going there. I agree in using a professional manager. They can handle all the legal issues of eviction and follow up if there is any property damage. Find someone who manages real estate as their MAIN deal, and not just an agent that also manages property. They are just hedging against those lean sales months. There is lots of good advice here. I personally think the "housing bubble" is area specific. I don't know how anyone in the San Fransisco Bay area ever affords their first house. Also, be careful about selling to soon. You need to have enough equity to cover the sales costs. Even selling by owner involves a few thousand dollars in Title insurance, Escrow, and possible excise taxes (as in WA). One of my professors when I was in college all those years ago was big into the rental market. His idea was if things ever went to pot, he would always have a place to live.
Good luck with whatever you do.

Jim

[BMC John Phillips III]

We've been renting our house out in Traverse City since 1998. A couple thoughts from past experience.

1. Once you leave consider it a business venture. Loose the emotional ties to it. We were told that and it's good advice. Otherwise you'll panic/get upset everytime something happens to it or needs repair.
Good luck.....John

John, I definitely am gonna have a problem doing this, since this is my first home and we are so happy here! But I know I have to do it, so I should be able to.

SSS, you know I am gonna watch that movie now! And you know that I am not gonna let go of my hopes of winning the lottery, the thing I have to remember to do is buy tickets!

Jim and all, thanks for the sound advice! I will keep you posted.

[ETCS David Kroll]

Renting out your house is definitely a personal choice. Currently I'm renting out three houses. I have found the most important thing is to get good renters into the house. Don't be desparate to get someone in there, wait for the right renter. I'm also using these rentals as my exit strategy from the CG. If all works out well, at least two of them will be paid for when I retire. That will be an extra $2k a month for two houses, when the third is paid off, $3k extra. My thoughts are five rentals is plenty, any more and I'll be tied down too much and won't be able to enjoy my retirement.
Dave

[BMC John Phillips III]

After much deliberation, I have decided to sell. Thanks to all for the input.