Owning rental property while full-timing

[wannabervin]

We're in the process of converting from stick-built living to full time rv-ing next year. We could sell the house, but it has been a good investment in a good location, just outside Washington DC. So, we are considering keeping it and renting it out. We would use a property manager to look after the day to day details. Has anyone had experience being a landlord while being out on the road, full-timing? How has that worked out for you? Any tips or advice would be appreciated.

[Jaydrvr]

I've worked on the road for decades, and for me, the only viable way to successfully own investment property is through the use of a qualified and trustworthy manager. I found mine through my real estate agent, who recommended him highly. If you're careful and diligent in choosing your manager, you'll enjoy a stable and profitable return with virtually no effort on your part. The hard work is all up front.

[theeyres]

We did that several years and like Jay we had the best management company we could find. We were fortunate in that I had had rentals in the past so knew where to look. They weren't the cheapest in town but when we finally decided to go ahead and sell the property was in excellent shape. It has to be somebody who will truly look for the best tenant and not just the first to come along. Too many managers will rent to anybody and not worry about the ultimate cost to the property. Horror stories abound. I don't know how to help you find that one in a million manager...but you need to find him/her.

[Kirk W]

The other item to look at is the location of that rental property, as compared to your declared domicile. If you are moving your domicile from a state that has an income tax to one that does not, the rental income will require filing of income tax in the state in which the property is located, and all expenses of the property will need to be tracked to apply against the profits. The issue could also muddy the location of your domicile if the state where the property is should question your having moved to another state. These items can be managed but need to be considered in your planning. Some states can be very aggressive about the collection of income taxes from those who move out of state, especially if the move is to one of the states without state income tax.

[Jaydrvr]

The other item to look at is the location of that rental property, as compared to your declared domicile. If you are moving your domicile from a state that has an income tax to one that does not, the rental income will require filing of income tax in the state in which the property is located, and all expenses of the property will need to be tracked to apply against the profits. The issue could also muddy the location of your domicile if the state where the property is should question your having moved to another state. These items can be managed but need to be considered in your planning. Some states can be very aggressive about the collection of income taxes from those who move out of state, especially if the move is to one of the states without state income tax.

True, of course, but since you're already keeping meticulous records for the IRS, for both income tax and, eventually, capital gains, it's just a matter of filing correctly. I personally domicile in an income tax state, and have income property in a non-income tax state. If you dot your i's and cross your t's, it's generally a non-issue.

[LFDR3116]

Renting our home out and taxes were a non-issue for us in that we declared to the city tax assessor the fact that the home was now a rental, which of course raised our property taxes considerably. There was no question that we were living there as not only did we declare our rental income, but the tenants also filed their tax returns using the address and claiming the rent paid to us.

 

On that note, you may want to find out how renting the house out will affect your taxes. Is it still feasible to rent, rather than sell.

[Smitty77_7]

We've been working very hard to remain as squeaky clean as possible, on the Domicile shift from California.

 

We retained a home that we use as a Vacation Home, and to provide free housing for my wife's Mom. We also retained a F150 at this property, and due to it being in CA the full time, kept it registered in CA.

 

We retained another home that we do rent out. So this requires us to file a 540NR (Non Resident) and pay CA taxes on that income.

 

We keep extensive records, and are out of California for the legal amount of time possible.

 

We do intend to make South Dakota, probably near the Sioux Falls area, our primary residence when we come off the road. Considering a combo Garage/Apartment Kit to plant onto a small amount of acreage.

 

We did have a very competent Property Manager to handle the rental for the first few years. But the tenant and I have made an agreement, to keep the rent a bit lower and he handles any day to day repairs and I transfer him funds to his accounts, as he emails me the copies of the receipts. We have an agreement that anything under $500 to just go and do. He calls, emails, texts on more expensive items. (The AC went out last year, and he called me first to see if I wanted to just replace the unit with a more efficient model, or see how much it would cost to get it repaired. I elected to send my AC man, have him determine if it was worth fixing, or replacing. Durned out to be about $175 repair. So got lucky on that one:)!) All of this, is due to having a good relationship with this gent, and trusting his integrity and both of us handling repairs the same way. Do it the right way. Spend the funds for good quality components, and competent workman. So far, it has been working well for us.

 

All that being said. One other factor on 'To rent, or to sell?'. What do you feel the Real Estate Market will do in your area? Are you in a location that could be beat down in housing prices? If so, can you ride it out until things turn around (And in some regions, we're seeing still almost 8-9 years later, still non fully recovered hosing prices.) Do you ever feel you might 'Come off the road back this house.'? Are you depending upon the equity in this house to fund retirement? These are all factors to consider:)!

 

Best of luck to you,

Smitty

[floncto]

I am a real estate broker and, with my RE agent wife, handle both sales and property management. I cannot stress enough that your representative must be responsible, conduct regular inspections, make sure that any rules you establish are complied with, and most importantly, realize they are working for you and not the tenant. When my wife and I were working for another broker, they would insist that we rent to "very wealthy and responsible" friends of theirs. Needless to say, we are no longer associated with them. I would also suggest that you allow no pets and make clear in the lease that the landscaping must be maintained.

[FULLTIMEWANABE]

FWIW, we personally have spent the past couple of years selling off ALL our rental properties in preparation for going Full Time. We've seen and heard first hand how hard it is to find a genuine "owners best interest at heart first and foremost" company/person to manage properties when one isn't present. We've always been very hands on with our revenues over decades and personally if we can't have them in the town we are present in or within a reasonable driving distance of, we just feel the risk versus reward and potential and likely added stress of holding on to them wasn't worth it.

 

Just saying FWIW and as always, to each their own, plus of course a lot will be dictated by the market place you are renting out in. Just be sure to keep excellent records/proof of value, when it converts from your primary residence to a revenue property!

 

Good luck, but again for what little it's worth, I can't tell you the absolutely sheer delight, freedom and peace of mind selling the last one that took over 9 months (and yes for a $50K loss over 10 years of ownership), has brought to me. With that said and done we are all for owning real estate in your younger years as that is for sure what has enabled us to embark on this wonderful future soon to start. We traded our future about to unfold, for the hassles and stresses of being Landlords and taking the risks and rewards for many, many years prior. We more than paid our dues, now we want to enjoy life a little slower and less stressful.

[Pat & Pete]

We also were very relieved when our house sold , after we'd rented it out for 4 years . We didn't want to be landlords 4 years before and definitely not now .

 

YMMV .