Basement Rental?
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Anonymous
| We are shopping for a house in the range of $500k (putting $100k down) so that the monthly payments are low enough that we can live off of one salary if I decide to be a SAHM. However, we've talked to a few friends who suggested buying a more expensive place with a basement that could provide rental income. If we do that, we're more likely to be able to afford our preferred location (Capitol Hill), as we've seen a few homes with rental units in the $850k range, and the rental income would offset the difference in the monthly payments. If we sell our condo (which we were planning on renting out if we buy the $500k home), we'll have enough to put 20% down on an $850k property and still have about $25k in cash savings. So, we'd have enough savings to get by if we couldn't rent the place for a few months or if we needed to fix something big. With my current income, we could qualify for the $680,000 mortgage even if the bank doesn't take the rental income into account. Is this a fiscally sound idea? The thought of borrowing $680k sounds absurd to me, but so many people have suggested it that I'm starting to think it's a good idea. Thoughts? |
Anonymous
| Do you want to be a landlord? |
Anonymous
|
Do you have a mortgage on your condo that you'd give up? And monthly fees?
Sounds like you are planning to become a landlord either way. How far away is the condo from your new house? Proximity is good. Tenant in basement can be problematic with a small loud family running and screaming overhead. But it's easier to manage since it's right there. |
Anonymous
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I would not do it. Having to live with someone below me who can hear everything (remember it won't be as well insulated like your condo) just isn't my cup of tea. Plus, if your lifestyles end up now matching up well, it could present a HUGE pain in the ass. And then there is the bill division. Are these places set up so you can charge for electric etc? Or are you going to pay for it? Do they have a full set up or is it only partial?
Even if this means you can't live in your preferred location, I'd find another house rather than deal with all the headaches renting your basement can bring. |
Anonymous
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Thanks for the input. We're probably going to become landlords one way or another (renting our basement or keeping the condo and renting it). It's not that I have some great urge to be a landlord, but we'd make $500+ a month off the condo after mortgage, fees, and bills, and as previously stated the basement would provide income to offset the mortgage on a bigger house. If we sold our condo and ditched the basement rental idea, we could probably up our budget to $600k, but I don't think that's going to get us much of anything on the Hill, so our only way to buy on the Hill seems to be the basement rental idea.
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Anonymous
Don't forget about taxes on your rental income when you do your calculations. |
Anonymous
| We rent a basement apartment but I have no view as to whether renting out your condo would be better. I will say that it's fairly easy to rent in Capitol Hill. |
Anonymous
| That is, to find tenants. Some times of year are easier than others such as August. |
Anonymous
| Being a landlord is terrible in dc. Unless it's a friend you can get screwed over. |
Anonymous
|
I've been a landlord for a number of years. No one was ever a day late on rent or any other horrors. The "worst" thing was a guy who was suppose to be "single", but the live-in girlfriend seemed to be rather permanent. No big deal for me.
You need to have a super strong "gut" sense for people, and be able to follow it. |
Anonymous
|
I wouldn't do a basement rental because I don't like sharing space with people I don't love. I do live in a condo, because I can't afford a house, but I am allergic to pets, smoke, am a light sleeper etc. I lived in the upstairs of a house once that had the basement rented and could hear and smell etc.
But, if you are a sound sleeper and not as picky about smoke, cooking smells, noise, etc, then go for it. It really all depends on how easy going you are with your living space. |
Anonymous
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Need more info which option is financially better.
I'm going to ASSUME the following: Condo fee is @250 a month, condo mortgage is 4% on a $250,000 30 year fixed mortgage, condo maintenance is $1500 a year. You can rent Cap Hill basement @$1500 a month, 10 months a year. With these #'s, it's better to ditch the condo and get the bigger house. |
Anonymous
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But either way, your housing (mortg+taxes+maintenance-rental income) costs are going to be really high in my mind.
With #'s above, if you rent condo your total annual housing will cost $47,400. If you sell condo and rent basement, it's $39,100. Hope your DH income alone is above $150 and you are NOT considering private schools for kids. |
Anonymous
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We rent our basemant and have been doing it for the past 5 years. Our reason to do so are a bit similar to yours. We become parents and wanted some financial room so that iI could be with our baby. Then my husband decided to go back and finish his Phd and I started to work PT. We couln't have enjoyed living in a house without the sacrifice of sharing it with someone. Look for a house that has a basemant that is totally separate from the house with its own kitchen and bathroom. We share the loundry and it hasn't been a problem.
Noise became a minor issue in both ways when our toddler started to walk and when we move his room to a larger room right above the sleeping quarters of our tenant. The tenant wiould have loud and exubrant phone conversations or decide to watch an action movie right at the time when I was about to put baby to sleep. I think thay laying out this kind of situations from the beginning will help. We have had 3 tenants so far and the 2 latest one came knowing and understanding that we had a young child. It changes matters when your family and the tenant have different schedules. Is it ideal? No, but it is doable. we are entering our 6th year or being landloards and I am looking forward to my husband finishing his PhD soon so we do not have to continue renting the basement anymore. |
Anonymous
| PP HERE, PLEASE SORRY THE TYPOS. I am replying from my phone. |