<p>What evidence does your wife have to suggest that prices are going to go up? I would debate this on the basis of actual data, rather than ‘gut feeling’ or ‘desire’. Of course even with data one can’t predict, but at least if you ask for evidence, you know what you are dealing with.</p>
<p>Does your current house have lead paint? If so, you don’t ever want to be renting it out.</p>
<p>I’ll reiterate what others said, landlording is not business to be lightly entered into. There is a lot of tenant-landlord law you have to be familiar with, the cash flow has to work (it’s not clear whether you have a mortgage on your current house). The insurance can cost more for a rental, a lot of times the taxes are higher, you will need to add extra liability insurance, there are income tax issues to deal with (depreciation, schedule E, etc). And this doesn’t even get into dealing with tenants.</p>
<p>Do you have the guts and financial reserves to let it sit empty for months rather than rent to a low quality tenant? Do you have the backbone to start eviction proceedings if the tenant is a week late with the rent and giving you a sob story? What will you do when you rent to someone and a month later 10 extra people are living there?</p>
<p>Owning rentals can be rewarding and profitable, but you have to know what you are doing, and you need a business plan, because it is a business. The only plan I’ve heard so far is “my wife wants it and the real estate agent says it will work.” This is not a business plan.</p>
<p>re short sales: In my area, maybe 1 in 50 short sales actually get sold. The banks are impossible to deal with, it can take months to hear anything back. It seems like the banks would rather foreclose. My W (who is a real estate agent) has given up on doing them, they are a total waste of time and energy for her.</p>
<p>^ Wow this is so completely different than our experience, and that of people we know. In the city in which we live, I would say half or more of our friends own and rent out property. It really hasn’t been this kind of big deal at all. Then again most I know hire a management firm to assist. It doesn’t seem that costly to do so.</p>
<p>Just off the top of my head:</p>
<p>Do you know how to legally advertise your property for rent?
Do you know how to screen a tenant? Do you know how to check their credit, verify their job history and rental history? Check their criminal backgrounds? Check if they’ve ever been evicted before?
Do you have written guideline on what is acceptable for a tenant in terms of credit rating, percent of income used for rent, length of time in jobs, married vs cohabiting couples, etc.?
Are you familiar with the housing discrimination laws?
Do you have a lease?
Do you know what is legal to put in a lease?
Do you know how much you can collect up front?
Do you know if you are charge a late fee, and if so how much?
Do you know how to handle a security deposit?
Do you know when you can legally enter the rental unit?
Do you know how to handle damages when a tenant moves out?
Do you know what utilities you can require the tenant to pay?
Do you have a pet policy?
Do you have a policy about tenants’ cars on the property?
Do you know how the eviction process works?
Do you know whether the housing court in your area is pro-tenant or pro-landlord?
Do you know what to do if a tenant complains to the health department? And then starts withholding rent?
Do you have a support network in place - a lawyer, accountant, plumber, electrician, landscaper, that you trust to work for you? Do you know other landlords who can advise you?</p>
<p>Do you know how to analyze whether the rental will actually make money and be a good investment?</p>
<p>There’s a lot to learn before you pull the trigger on a rental. Are you willing to become an expert in this?</p>
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This is certainly a strategy you can use, however:</p>
<ul>
<li>the management company will take 10-15% of the rent as their fee; for many rentals this is all of the profit</li>
<li>in my area there are few if any competent management companies who want to deal with small properties and small landlords - my wife constantly has people asking her if she knows of any (or if she will do it), and there are none she would recommend (granted she probably doesn’t know them all)</li>
<li>no management company will care as much about your property as you do</li>
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<p>I wouldn’t feel comfortable trusting a 3rd party to find tenants, arrange maintenance, etc, without significant oversight.</p>
<p>Rental property takes many factors to work-- the right location, the right landlord/property manager , the right tenant, the luck of finding a good tenant who pays the rent on time, doesnt trash the place, stays longer than 6 mos, etc etc. Even if your current house is paid for, you will still have tax implications that will probably rise with it is no longer your primary residence. For heavens sake, as empty nesters you dont need a BIGGER house. You and your wife can buy a second home- a place near MIT, stay with/near your daughter like she (your DW) wanted to, and when your dau graduates, if she stays in Boston your dau can live there, and if not, you can rent it to students. Sounds like a better plan :)</p>
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<p>I don’t think there is any need otherwise we would have moved earlier. DW is different and thinks that we do need it. We made a decision 12 years back to buy this house so that we can put DD thru private schools. Now DW wants a bigger yard with a pool etc.</p>
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<p>DW wants to give to a management company for 8% of the rent and she told me that they take care of everything. Finding a tenant, getting the repairs done, collecting rent etc.</p>
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<p>This, to me, is the biggie. It sounds like DW wants to upsize and it will require you to shoulder most of the burden of it. I think the two of you might want to get on the same page regarding your ultimate life and spending goals - whether that’s a larger house, multiple houses, travel, buying a place near where your D eventually settles, etc. But we on this board can’t advise you on that.</p>
<p>I know several people with real estate/rental properties. Management company or not, it can be a major HEADACHE and there are lots of issues/hidden costs/expenses. Not to mention someone will be living in the house you hope to return to when you “downsize”. What if you then cant rent out/sell the bigger house then? Is this about wanting to hobnob with snobs?? Not hearing any good reasont to do this from your posts other than “she wants it”. There are lots of things we want but dont get because it is impractical. Dont do it.</p>
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<p>Yea, DW wanted to move but I was able to convince her otherwise. A starter dwelling in NYC is still I would love to have but that is what bring DW to this. She thinks if I can invest in something like that then we can own a bigger home too.</p>
<p>If you have to work like a dog to provide this, she may be enjoying it… as a widow.</p>
<p>POIH…related to your above post #31…if your DAUGHTER asked you to buy a dwelling, my bet is you would do so without batting an eyelash.</p>
<p>Thanks everyone, it seems very clear from all posts that my intuition regarding this is correct and is not a great idea to dump the saving into down payment on a 2nd home.</p>
<p>I appreciate everyone who took pain to reply. I’ll have more information to convince DW to not go ahead with this.</p>
<p>Actually, I was beginning to wonder if this thread was going to be used to show DW that others thought it was a bad idea, so we would be the bad guys instead of POIH!!</p>
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<p>That is true because I think it will be really useful for her living in an apartment we owns which she can pay towards instead of renting and then sell it to buy her first home.</p>
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<p>It’s always helpful to have some concrete evidence to support your reasoning otherwise who care what their husband think.</p>
<p>so if we all said it was a great idea if you had the disposable income to go ahead and buy while the real estate market was so depressed that you’d make a fortune down the road when you sell, you’d do it?</p>
<p>ParentofIvyHope, I have a pool. A pool is a pain to take care of and now that my kids are grown, the pool gets very little use. The pool man is happy. He makes a few bucks. Just running the filter throws me into a more expensive utility tier and raises my electricity bills. When I tell real estate brokers I have a pool, if they are polite, they just frown. I would like to get rid of my pool. Maybe I can ship it to you. :)</p>
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<p>There is a theory I subscribe to, which is sampling a random opinion. Unless everyone on CC have an agenda to give POIH wrong advice, any nod towards buying the 2nd home would have gotten 10 posts on why not to do it. This is based on this thread as not a single post was in favor.</p>
<p>It works, honestly speaking people on CC have no reason to provide a wrong opinion and I didn’t want to discuss this with my local friends. </p>
<p>I’ve always got useful output from my posting on CC and that is why I still hang here.</p>