Murphy101 Posted November 19, 2015 Share Posted November 19, 2015 (edited) Has anyone moved out of state and NOT sold their previous house, but instead rented it out? Pros/cons? How insane difficult is it to get a loan on the second house if you do that? Do they view the previous home as income or is it just a huge negative making it impossible to get a loan on the second home? We have lived in this house almost 10 years. 1 son would be staying and renting under a legal contract but he wants to have roommates, which we would also insist be credit checked and on the lease, to offset the payments. I can make the payments on his own, just to be clear. But it's understandable that a single guy would want to cut that expense considerably if he can. Understandable of course. We like this idea bc we want to help the grown kids staying here and because after just 10 years, there's some equity, but honestly not enough to offset the costs of selling. To get a really good price, we'd have to put a lot of money and time into updating and some other cosmetic things. Such as painting the exterior, and new carpet for example. Is this doable? Reasonable? Tips? Suggestions? We simply cannot rent in the new state. The rent prices are insane. For double the cost of a mortgage payment, we'd get 1/3 the size of house and have a one hour commute and we can't afford that even if it could work for us. And really, it's unlikely we will find a rental that is okay with a family with 7 kids and pets moving in. Edited November 19, 2015 by Murphy101 Quote Link to comment Share on other sites More sharing options...
PrairieSong Posted November 19, 2015 Share Posted November 19, 2015 (edited) We did it when we moved to another part of the state. We were newlyweds with low income. We rented it to one woman who turned out to be a royal pain but the next renters were better. We don't have that house anymore. I'd rent to my own son or daughter but yes, definitely do background checks for criminal history on the potential roommates. If anyone has filed a claim against them for unpaid bills that should show up, too. Edited November 19, 2015 by PrairieSong Quote Link to comment Share on other sites More sharing options...
OneStepAtATime Posted November 19, 2015 Share Posted November 19, 2015 (edited) Yes this is doable. I have done it and so have my relatives. Definitely have a contract with all the renters and a credit and background check. I would also consider insisting they have renter's insurance. If something were to happen to the house, your homeowner's insurance probably won't cover anything but the structure since you aren't living in the home. You might also encourage your son to create a list of expectations for each of the roommates, including daily maintenance/house care. For example, how do they handle mopping/sweeping/cleaning the bathrooms? What about groceries? Lawn care? Starting out with everyone on the same page saves a lot of grief later on. Edited November 19, 2015 by OneStepAtATime Quote Link to comment Share on other sites More sharing options...
Murphy101 Posted November 19, 2015 Author Share Posted November 19, 2015 How do you approach your lender about it? What do they need to know? Do you just sign something that says you are going to rent the previous home? Quote Link to comment Share on other sites More sharing options...
redsquirrel Posted November 19, 2015 Share Posted November 19, 2015 I don't know about the mortgage issue, but I know people who have done it. They usually use a management company to deal with the renters. The company finds tenants, deals with problems like a furnace not working etc and any other problems, and gets a cut of the rent. Being a landlord is more work than you might think. Being an out of town landlord is even more difficult. It can be worth it to have someone in town to deal with myriad issues that come up. 1 Quote Link to comment Share on other sites More sharing options...
Wilma Posted November 19, 2015 Share Posted November 19, 2015 We are doing it! We moved this past summer and held on to our old house -- same city, and the house was completely paid off. So far it's worked out great. We hired a company to thoroughly vet the applicants to rent but we're handling the ongoing management ourselves. We're only a few months in, but so far it's been great. Quote Link to comment Share on other sites More sharing options...
monstermama Posted November 19, 2015 Share Posted November 19, 2015 In my friend's case, he had to present the signed lease agreement to the mortgage underwriters to show that they had steady income for it. He did still have a mortgage on the rental house, also, but the rent more than adequately covered that. I'm not sure if it would have been different if he owned it outright. Quote Link to comment Share on other sites More sharing options...
Guest Posted November 19, 2015 Share Posted November 19, 2015 We are considering it because of the market in this area. But we really don't want to be landlords, so I keep hoping we can sell in the next few years without much drama. Quote Link to comment Share on other sites More sharing options...
Liz CA Posted November 19, 2015 Share Posted November 19, 2015 (edited) If you have a tidy sum to put down for the second house, it should not be a problem, especially if you can show that you can handle both payments or you show that the rent payments cover a majority of the first mortgage unless the first home is paid for. Edited November 19, 2015 by Liz CA Quote Link to comment Share on other sites More sharing options...
marbel Posted November 19, 2015 Share Posted November 19, 2015 We did it in 2007. I don't recall details but I don't think the lender cared as long as we had down payment $ and income/other assets to support two mortgages. At that time we did. Our situation was quite a bit different from yours. I hated being a landlord. We rented to friends and I'd say that the relationship was damaged some because of them renting from us. Not that they or we did anything wrong. It just changed the dynamic of our relationship. I grew to hate hearing her voice on the phone because so often it was because there was a problem. Our homeowners insurance required a property manager who was not the tenant so we named someone but trusted the tenants to do right so the property manager never had to do anything. It was just stressful for me. It would be different with an adult child, but I agree with those saying to do credit/background checks on any roommates. Set very clear behavioral expectations. We never said anything about pets in our house, so we were caught off guard when the tenant asked about a cat. Since we had never said "no pets" we ended up saying yes to the cat. Then a dog. Not sure it mattered in the long run, but if we'd moved back it would have been difficult with our cat allergies. As it was, we sold the house when they moved. We had to replace all the carpet and repaint the whole house, but it was time for that anyway. Quote Link to comment Share on other sites More sharing options...
Arcadia Posted November 19, 2015 Share Posted November 19, 2015 (edited) How do you approach your lender about it? What do they need to know? Do you just sign something that says you are going to rent the previous home?When we bought our second home, the banks have a check box on their form which ask if we intend to rent or sell or others for our first home. The bank wants to know how much mortgage is left compared to market price or valuation on property tax bill. Also in the event of no rental income, what percentage of income would the two home mortgages add up to. Both my homes are in high COL where rents are much higher than our mortgage payments. So that is to our favor. ETA: My parents are staying in our first home so no rental income. Home prices are sky high in my hometown and our home is relatively senior friendly. My friend used a management company because it is less stressful for them. Edited November 19, 2015 by Arcadia Quote Link to comment Share on other sites More sharing options...
Murphy101 Posted November 19, 2015 Author Share Posted November 19, 2015 If you have a tidy sum to put down for the second house, it should not be a problem, especially if you can show that you can handle both payments or you show that the rent payments cover a majority of the first mortgage unless the first home is paid for. I don't know how tidy a sum we will have yet. But we are planning this about a year from now. Our plan at the moment would be that rent will cover all of the mortgage plus another $500-600 per month. That would still be well within going rates for rentals the size of our home. The "extra" funds will go towards maintence as it comes up and as income for us. 1 Quote Link to comment Share on other sites More sharing options...
Annie G Posted November 19, 2015 Share Posted November 19, 2015 When we moved here we rented our house in Georgia. It was pretty easy, but not without headaches. Our property manager was a thief, but I'm sure it was worse for the tenants than it was for us. Our new mortgage company only applied something like 75% of the anticipated rental income to our income, assuming that we would have an empty house for a little each year. They overstated it - we had a pretty good occupancy rate. Our insurance on the house went up quite a bit when it was converted to a rental. Our property tax went up a little because we lost the homestead exemption. Since your son will be living there, I think you have some advantages we didn't have. It should work out nicely in your case. Quote Link to comment Share on other sites More sharing options...
Laura Corin Posted November 19, 2015 Share Posted November 19, 2015 We moved to Hong Kong and rented out our flat in London. We left it with an agent who managed it okay. When we moved back to the UK, we changed the set-up and it's more lucrative now. The mortgage on that is a buy-to-let (business) mortgage now. We have a separate domestic mortgage on the house that we now live in. Quote Link to comment Share on other sites More sharing options...
busymotherof4 Posted November 19, 2015 Share Posted November 19, 2015 We bought a house this summer while trying to sell our old one. The bank just looked at total mortgage payments. We technically can afford both payments but not really. We are looking into renting the old place out. We did put 10% down on the new place. Quote Link to comment Share on other sites More sharing options...
idnib Posted November 19, 2015 Share Posted November 19, 2015 We've done it but in the same state. The lender wanted to see the lease just to confirm the rent amount. Quote Link to comment Share on other sites More sharing options...
Spryte Posted November 19, 2015 Share Posted November 19, 2015 We moved this past summer, and that was our plan until right before we moved out of the old house. So we had gotten approval from the lender, and had our mortgage in place. It wasn't terribly difficult. We ended up deciding to put it on the market, to see if it would sell quickly (it did) but had it not - we'd be landlords now. I'm not sure if it affected the amount we could borrow for the new house. I was appalled at the amount they preapproved, and we only used about half. So that part didn't really affect us. I think they count the rental as income, if you have a renter lined up. Quote Link to comment Share on other sites More sharing options...
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