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Discussion Starter #1
DH and I are seriously looking into buying our next door neighbor's property as he is moving. It's not a big place (a small two bedroom), but his property was once part of our property (many, many years ago) and is SOOO close (town close and we live out in the middle of nowhere). This might sound bad, but we want to control who our neighbors are since we live so close together. The price is very reasonable and given the favorable loan rates right now, it's a pretty attractive offer.

We are planning to rent the place out at least until it's paid for (hoping <15 years) and I was wondering if anyone had any experience. I'm a bit worried about being a landlord, but we are right next door, so I think that will alleviate some of the issues. We already have an interested person if the rental price is reasonable, one of DH's friends from high school. I know it can be difficult to deal with friends, but I think this one would be a good tenant (he a very stand up, responsible guy). Otherwise we're looking at renting to strangers which is a little scary. My brother has a little house similar to the one we are considering buying and he just rented it out this fall with an ad on Craigslist (he had lots of interest), so I'm hoping we'll get a renter one way or another.

Just looking for any real world experiences or advice.
 

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Tracer, Rumor & Cady
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My sister & I coowned a rental prop. We eventually found a great tenant...worst tenant was a family member (surprise!). The part that was a pita for us was the distance...not a prob for you. My former boss bought the neighbors house for thesame reason and he had had a very good experience. Because it is a house less turnover..
 

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I would like to do the same thing. Our elderly neighbor just passed away a few weeks ago and her children can't afford to keep the house. Unfortunately here I just wouldn't be able to rent it for enough money to pay for the mortgage and taxes. CT is the tax you to death state.... I'm telling all my friends about it in hopes that one of them will buy it, before it goes on the market.
 

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I would recommend doing a lot of research. You're opening yourself up to potential lawsuits if you deny someone for any reason that could by the slightest stretch of the imagination be seen as prejudicial. You should also consult an accountant about the tax effects - income on rental property is taxable income and that may be a factor in your decision as well.
 

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We own a condo in Santa Monica about 2 hours from us. My hubby bought it after college and never sold it. The biggest pain in the butt about it is that it's 2 hours away, so you won't have that issue.

You need to be prepared (mentally and financially) for tenants doing really stupid stuff, even if they are good tenants. We've had carpet ruined twice with candle wax and wine spills, granite countertops stained permanently, a tenant putting dawn dishsoap in the dishwasher because they were out of dishwasher soap and flooding the kitchen, a tenant having a toilet overflow and not turning off the water so it ruined the wood floors, never cleaning the shower for several years so that the shower doors were completely ruined, etc etc.

It's just frustrating to have people not take care of a property the way you would. We've had people who seemed clean and when they moved out it was DISGUSTING. But other than that it's great! lol
 

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New Mommy
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I have the same situation here. Little house next door that used to be part of my property years before I ever bought my house. I bought it because I wanted to control my neighbors, I thought I could live in it while my house was being rebuilt from earthquake damage(my dogs thought otherwise!) and if I get to the point that I can't keep up my big house I could downsize and move next door while still staying in the neighborhood.
I am a professional property manager, so the idea of a rental wasn't scary, but the idea of a rental next door to me was! So far I have had friends live there and it's worked out OK. I do spend a lot of time over there taking care of things, but the tenant (Rose's Dad ) helps me out a lot too.
Just make sure you have a good contract in writing. Know the rentals laws in your state. A tenant can end up owning your property if you violate their rights. Start a fund right away for repairs. I just had to come up with $12,000 to hook up to the sewer because the septic tank failed.:mad:
 

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We have rental property and the situation works out really well for us. You're welcome to PM me with questions. In our experience, everything with a rental is a bit more expensive - mortgage interest rates, insurance, etc. One thing you may want to think about is whether you'll enjoy being a property manager and if you'll feel comfortable giving your tenants "room to breath" so to speak when you'll be able to see everything they're doing from next door. I get irritated now when our neighbors that rent from others don't mow their lawn often enough. I can't imagine the things that would drive me nutty if it was our property.
 

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Clark Howard (clarkhoward.com) has lots of good tips on when it is a good idea to purchase a property as a rental unit. I think the rule of thumb is the rent you can collect should be able to cover your mortgage, insurance and taxes.
I have read that there is a much bigger market for rentals because so many people have lost their homes. So, it may be quite easy to find someone to rent (if this person you already have in mind doesn't work out).
 

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My husband and I have had rental properties for over 20 years and they have been very good investments for us. Definitely familiarize yourself with the rental laws in your state. Some things that have worked for us are only doing month-to-month rental agreements, no leases. We have only had a couple of people stay less then one year and on the flip side, prefer being able to terminate the tenancy if it isn't working. A lease ties up you and your tenant. Do a credit check of all prospective tenants and walk thru the property at least once a year. Feel free to PM me with any questions you may have.
 

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Boy, I wish my kids could find a place that would rent month to month. They must re-new for a full year when the lease year ends.
 

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I am in Australia so I don't know how or if my point is valid. Over here you cannot get landlords insurance for your house unless you have a qualified real estate agent managing the property. Can anyone who self manages real estate in usa clarify is there are similar stipulations concerning landlords insurance in us?

So managing the property yourself has additional concerns. We rented our house out for two yrs when we last travelled around the world and we had no problems though we didnt manage the property ourselfs. I have had multiple friends that have horror stories of tenants for hell, so be careful.

I would strongly advise getting a qualified person to manage the property. It places the stress upon someone else and lowers the inherited risks associated with self management especially if you are living next door. What happens if the renter that seemed a worthwhile and responsible citizen turns out to be a nut case or just a nasty scary person. You take take the appropriate action to evict the tenant and next thing you know you have them busting your door down in the middle of the night with the intent of seriously harming you and your loved ones. Really it could easily happen.

If you have someone managing the property the tenants don't even have to know you own it. Also renting to friends and even worse family do often turns out a horror story and yes you think not my friends and family, but you would be suprised how things get out of hand!
 

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Discussion Starter #13
Boy, I wish my kids could find a place that would rent month to month. They must re-new for a full year when the lease year ends.
Hmmm. I know a place that's going to be for rent...:D
 

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Discussion Starter #15
Thanks for all your input everyone. It's brought up some really good points.

Our plan is to just make back all (or at least most) of the cost of the loan, insurance, and taxes. We've already got a quote from our insurance company and know what the taxes are. We just need to get the final quote from the bank to know pretty much what it will cost us. Then in about 15 years, it will be fully paid for and we can be neighborless if we so choose (the house was built in the 1930's and, while completely liveable, is nothing special).

I'm scared but excited about the prospect (well, to be honest, those feelings pretty much sum up my life at this point!).
 

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Frankly, with housing prices so depressed, I believe this is an excellent time for anyone who can, to buy up "rentable" houses. A two bedroom house, I think, is perfect for a rental. It will do perfectly for so many renters: a single person who wants to have an extra room for an office or someone to stay over, for 2 room mates sharing expenses, or for a young couple (and they could continue to stay on after they have that first child).
 

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Coley - my cuddle bug
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We have 2 rentals. One is the first house we built when we got married and the other is the parsonage next to the church.

Especially being so close I'd really look into a property management company and have the tenants not even know who you are. Otherwise, you'll be bothered constantly. They are paid to know the ins and outs and we've also found that if there was an instance where the rent was late or something, we're not the bad guys. We could never evict anyone - it's just the way we are. We'd end up with people living free! :curtain:

We pay 10% of the cost of rent, which is not bad. You just include that in the rental price. It would be ideal doing it that way because if there's an issue you will see it and call the pm people right away. You can keep an eye on the place but be a fly on the wall.
 

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I, too, have heard this is a good time to have rental houses since so many folks can't afford to buy one. Good luck and stay calm about everything. Better for little IowaGold
 

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We have a rental property and have a wonderful Real Estate agent that finds renters, does the contract, ect. There is a fee but it's worth it to us. I manage it if there are problems but all the upfront part is done by him. It works well especially since I am a softy.
 
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