Hey, guys. It’s Brad with Arbor View Properties. Thanks for checking out our video. This is sort of a continuation of another video I did about mailbox money, and the question is, should I rent out my house instead of selling it? That’s a great question. The best answer to that is it depends, and it depends on your personality. Are you the kind of person that is… Can you sleep at night knowing that there’s someone else living in your house and they might trash it or something might happen to it? Now, granted, something might happen to it. You should always carry insurance on your properties. You should require your tenants to carry renter’s insurance. That protects you against things that might happen. Insurance is great and you never know when you’re going to need them.
For instance, we had a rental property a few years ago where we had an air conditioning condensation line clog up and back up, and we didn’t even know it. But for weeks, the water was running down behind the wall and is getting under the flooring. And I happened to go to our rental property and I show up one day because on this particular property, I had to go change the air filters out. Whoever installed the air conditioning unit in this closet put it too far over and you actually had to remove the door from the closet to be able to get the air filter out of the unit. It was a dumb design. They should have slid the unit over just like a couple inches to the left and everything would have been fine. But anyways, I wasn’t going to make my tenant have to take the door down every time they wanted to change the air filter.
Typically, your tenants would change your air filter out for you, but in this case, I didn’t want to have to have her do that. It wasn’t right to make her have to try to take a door off and disassemble a door just to change an air filter. So I showed up to the house and I walk in and all of these hardwood floors, which we had just installed… We’d had this tenant for years and the carpet was getting worn out. She was like, “Look, can you change the carpet?” And I said, “Well, we weren’t planning on doing carpet. We were going to put hardwood floors in once you moved out. But if you’re planning on staying for a few more years, how about we do this?” This happened to be over the holidays. I think it was Thanksgiving.
And I said, “How about we do this? Since you’re going out of town to visit your family for Thanksgiving, I’ll install the floors while you’re gone.” So we worked it out where basically, she sort of boxed up some of her stuff and we just moved it around and we changed out the floor so when she came home from Thanksgiving, she had brand new hardwood floors in the whole place. So that actually worked out pretty well for her.
But anyways, I showed up and all the hardwood floors were cupped. And if you’ve seen a wet floors, they cup. They get all bumpy like this. So immediately I was like, “Oh no. There’s water under here.” And I immediately started investigating it. We ended up having to file a claim with our insurance company and you know what? At the end of the day, that whole headache only costs us $500.
We had a $500 deductible on the property, which is kind of low. Most people’s deductibles are a little bit higher, but we had a really good insurance on it. It costs us 500 bucks to fix it. Within about a week, we had everything dried out and we’ve had new floors installed and new drywall put in because some of the drywall got wet and it was all mitigated properly and done properly. So we ended up getting everything taken care of. So that’s one thing that can happen with a rental, but don’t let that discourage you. Rentals can be a great investment. They can generate you lots of income over time and there’s great tax benefits to go along with owning rental properties. Myself, I’m looking at acquiring as many rental properties as I can. So basically one day in the future, I can literally sit in my chair and if I don’t want to have to work today, I don’t have to work today and I still have money coming in every month.
That’s the beauty of it is if I want to go take a week off and I want to go hang out at the beach for a week, I still have money coming in. If I want to take an entire month off and literally sit on my butt every day and do absolutely nothing and eat donuts all day, I can do that and I still have money coming in because if you have enough rental properties, that money comes in.
Once you get to scale and you get enough of them, you can actually… And you can do this with one if you want to, but you hire a property management company and they manage everything for you. Typically, it’s somewhere between eight to 10% of the monthly rent is their fee that they charge. They’ll take all the phone calls. They collect all the rent. They handle everything related, even repairs. They have their own repair people that can repair things, so it’s great. Definitely have a property management company that the way it’s a lot more hands-off for you and you don’t have to deal with it.
So that’s the benefit of a rental. One thing you want to make sure though, is that you are getting your rent, okay? Minus you got repairs. You should set aside some money for repairs, general repairs, minus cap. We’re going to call it cap X here. That’s capital expenses. Capital expenses. So these are your big expenses. These are like replacing the roof, replacing the HVAC, repainting the… Some would argue repairs, paintings and repairs. Maybe, maybe not. These are your big, big expenses with the house that you’re going to have to do every so often. Replace the water heater, that sort of thing.
So you want to set aside some money over time for that and then you’re also going to set aside some money for vacancy, because occasionally you’re going to have a tenant move out and your unit’s going to be vacant for hopefully, not for very long. Hopefully, you’re in an area and you’re priced right where you’ll get a new tenant in it right away and you won’t have that much downtime. But you’re going to have a little bit of downtime and you’re not going to be generating income that month, so you’ll have some vacancy expenses.
And then finally, is property management. You’re going to want to set aside, obviously, a portion of the rent. If you’re going to do property management, I do encourage you to do property management. Don’t try to do it yourself. If you’re trying to manage it yourself and it’ll sort of discourage you from wanting to do more. It’s worth it just to pay the money. With our rentals, we always do a property management company. It’s worth the 10% to pay them to manage it for you, so you’re not taking phone calls at three o’clock in the morning or whatever, having to deal with all that nonsense. So definitely you want to set aside some money. Typically, people will tell you sometimes it’s between 30 to 50% of your monthly rent here is that, so somewhere between 30 and 50%. If it’s a newer property, maybe you do 30%.
If it’s a newer, you may not have as much expenses, but maybe if it’s an older property, it’s going to need more repairs. Maybe it’s in a bad area. Bad areas typically have a lot higher turnover from tenants, so you have a lot more vacancy expenses. Your property management might cost you more because they’re having to deal with problem tenants. So between 30 and 50%, right? So then the other let’s call it 70 to 50% belongs to you and you get to keep. And then out of that, you’re probably going to have a mortgage payment you have to pay, or maybe you don’t. I hope you have your house paid off, but a lot of people are going to have a mortgage payment. So you might have a mortgage payment. So if after all these expenses and the rent and your mortgage payment, if you’ve got a little bit of money left over after that every month, that’s awesome.
This is a great investment for you. You should continue to do it. But if you’re going to be in the negative after all that, your house is probably not a good rental property and you should probably just thinking about selling it outright, or maybe you sell it on seller financing. Check out our other videos about seller financing. But those are some of the things you need to watch out for. And then again, highly recommend property management company. There’s some good ones and there’s some bad ones out there. Make sure you read some reviews, figure out which one’s good, which one’s bad. But should you rent my house out instead of selling it? That’s a great question. Maybe you don’t plan on being away for a long time. Maybe you should rent it for about a year and then think about selling it later.
So I hope this helps hope. I hope this answers your question. If you do want to just sell your house outright and you don’t want to mess with it, and you don’t want to be a landlord, click on the link below. Go to our website, Arbor View Properties. We’re a house buying company in Metro Atlanta. We buy houses all over Metro Atlanta. We’d love to buy your house from you. You call us at (770) 810-5715 or, again, go to our website and fill out the web form, and reach out to a member of our team, and we’ll make you an offer on your house. So thanks for checking out the video today. Hope you guys have a great day and we’ll see you later.