Two people, two houses...best options for second house?

June 4, 2015 11:47 AM

Here's my situation: female, late 40s, employed homeowner. Moving in with my boyfriend, also a homeowner. What to do with my house for best financial stability/payoff in the future?

I own a home which I bought 3 years ago in a suburb which is showing value increases in all of the surrounding homes. My own home's value has already increased in the last three years as well, and I've made some improvements. My mortgage payments are very low for the area as I put quite a bit down. I love my house and enjoy the neighborhood. I estimate that I have about $100k in equity, were I to sell now.

Enter the boyfriend. I met a guy over a year ago who lives nearby, we've been happily dating and are most likely on track for marriage within 2-5 years. He also owns a home, somewhat larger and probably 20% more valuable than mine. He's lived there for long enough and worked hard enough at paying his mortgage that he estimates it will be paid off in 2 or 3 years.

We are currently making plans to move in together, to his home. This is where my question comes in. What is my best bet as far as my own home? I have considered several options, including (in order of likelihood) renting it out, using it as an AirBnB property, selling it, or keeping it semi-empty as a place for me to get away and have "me time."

My thoughts and reasoning: the home is increasing in value and I feel it's a good investment property. If I rent it out, I can most likely get around twice the cost of the mortgage. But emotionally, I have trouble imagining someone else living in my much-loved little house. I don't know that I'd trust anyone to take care of it. Also, there's the hassle of either being a landlord or using a property manager.

Selling is out of the question at this point, since I feel that it's a good option to hang onto it, in case my relationship ends. I don't think that's likely but of course you never know. Also, I think it's a good enough investment that if I wait to sell, I will see quite a bit more equity in the future, since we live in a growing area.

Using AirBnB could, if I do it right, make enough to pay the mortgage, but a little research shows a lot of horror stories told by AirBnB hosts, and it would entail more work for me than just renting it.

Leaving it empty or partially empty seems like the best option emotionally but not logically. I'd love to be able to go there and work on my beloved garden whenever I want, something I couldn't easily do with renters. And as much as I'd like my boyfriend to move in with me rather than me with him, it's a pretty small house for two people.

So...what is my best course of action? After typing this all out thoughtfully, I think it may be that I need to suck it up and rent out the house. I'm interested in input and opinions, though, and maybe options I haven't thought of. Thanks!

posted by TochterAusElysium to Work & Money (13 answers total)

it sounds like the smart money is on renting it - if you can transition from thinking of it as your home to thinking of it as a house that you own that is somebody else's home.
posted by entropone at 11:52 AM on June 4, 2015 [4 favorites]

An option you didn't mention, (which may not be practical for you, and I don't know what other practicalities it would involve), would be to rent parts of it out in some fashion other than a rental residence, perhaps as a therapy office, yoga studio, or for weekend workshops of some kind.

This might be a lot of networking effort for you to set up, but it would involve more like office hours than a short or long term resident, and it would bring in some cash to offset your mortgage. With any luck, once set up, it wouldn't be that difficult to maintain, and would still allow you full use of the place under most circumstances.
posted by vunder at 12:02 PM on June 4, 2015 [1 favorite]

I agree that making it a rental property makes the most financial sense. Why not try it out as a rental? Just because you decide to rent it out doesn't mean you have to do so for the rest of your life. You can make the lease as long or as short as you want. If you decide you just can't stand strangers living in your house, you can always not renew and keep it as your retreat. Once they move out, get some professional cleaners in, do some light refurbishing like new paint or curtains or whatever, burn some sage and it's your (second) home sweet home again!
posted by Beti at 12:02 PM on June 4, 2015

I used to have a boyfriend who rented a place from a woman who didn't live really there. He was her roommate. Except she didn't live there. He paid about 2/3 of what he would have normally paid and basically had free run of the house - except that there was the chance she might appear once in a while. He felt this was an awesome deal and was totally willing to make the trade-off.

In Canada, it would make sense to maintain that you were still living in the property, so that you don't end up with capital gains tax. And I imagine he was paying her in cash, as roommates do, so she probably wasn't claiming it. If you are in another country, I don't know how that works. In the US, if I am not mistaken, people are taxed on gains from the sale of their homes, maybe?

I would be inclined to keep renting your place out. You could always just rent out a couple of rooms to people and tell them you still come there to work on your garden. I had a landlord who rented the basement to me and my roommate - individually - and we just had this clause that called us lodgers, not tenants. Maybe you would prefer something like that? He told me it was good because he could get rid of individuals (rather than both people being on a lease) and he could still use the basement suite anytime, if there was a problem with the furnace. It was a reasonable enough arrangement and I was a student.
posted by Chaussette and the Pussy Cats at 12:03 PM on June 4, 2015 [3 favorites]

*Because if you're being taxed on the gains from the home, it wouldn't have the same tax incentive for you to maintain it as a principal residence, like she was. I am not encouraging tax evasion. I was just explaining. In your case, I think it makes sense to perhaps do so that you can work on the garden. Maybe you will gain some emotional distance and eventually go to full rental.
posted by Chaussette and the Pussy Cats at 12:04 PM on June 4, 2015

I also vote to rent it, at least for a year. If the hassle is more than it's worth then sell at that point - plus you'd have a year of co-habitation under your belt to make sure that you're on the same track to marriage you are now.

I think once you move out you'll be more able to emotionally detach. I felt strongly about my first house, too - we had to sell it to move cross-country. It was a sad moment but I recovered quickly and rarely thought about it again after that. It's part of life and my guess is you'll be able to move on quickly.
posted by handful of rain at 12:05 PM on June 4, 2015 [2 favorites]

I rented a home from a landlord who kept his garden in the back and he came by when he felt like it (every few days in the spring and summer) to garden and mow the lawn and pick fruit from the trees. I think if you carefully screen renters you can find someone nice and normal who will still let you come use the property at your whim. It's your place, so you can set the rules of your lease.
posted by sockermom at 12:33 PM on June 4, 2015

Nthing that it's not uncommon to have rental situations where the landlord maintains access and right to use the house and yard (possibly keeping a bedroom reserved) but mostly doesn't live there. You'd have to price it somewhere between a private home and shared housing (housemates). And it sounds like you're not in a rush so you can take your time finding a responsible tenant.

While I was a student in transition, I lived in a house where the landlord was typically only in town for the summer and they took up one room in that time. I know someone here whose landlord lived in a trailer in the yard and used the bathroom in the house for a few months before moving elsewhere but still comes by to do yardwork as they please.
posted by bread-eater at 1:24 PM on June 4, 2015

Depending on how close your boyfriend lives to your current house, and on how stressful your job is, it may be a pain to do landlord-type duties like schedule repairs and so forth. Also, vetting tenants can be an issue. This may also have ramifications for your homeowner's insurance and mortgage.

(I had a HUGE problem when I moved to Virginia and put my house in Massachusetts on the market -- about six months in, my insurance company sent me a nastygram that they "discovered" my house was unoccupied and cancelled my policy. Then my mortgage company had a canary about the lack of insurance, and I had to scramble to find vacant home insurance that cost about four times as much. This might be an issue if you're unable to find a renter. If you are, you'll need to convert to a landlord's insurance policy.)

Also, the rent is considered income, but anything you do to (for example) repair the house might be deductible. Consult a tax professional.
posted by tckma at 1:34 PM on June 4, 2015

Renting it seems like a good idea, but you might consider hiring a property manager as an intermediary. I've rented from people who had a second home before, and they underestimated the effort of being a landlord, plus there was a lot of friction about maintenance, mowing, etc. Unless you love the idea of going over there to fix stuff and dealing with potential "people problems", I would put a layer between you and the renters despite the fees.

I also had a situation where a family member rented a house to a guy who made it into a pot grow farm, kept weapons there, and let the whole place fall into ruin due partly to the family member forgetting to go by and check on things frequently. He was keeping up a Mr. nice guy front the whole time. A property management firm should handle that stuff, and will also keep you from inadvertently creating a not-great rental agreement.

Best of luck!
posted by freecellwizard at 1:53 PM on June 4, 2015 [2 favorites]

I really like the idea of having a roomate, but you're not really there much at all. Since you'd still have free reign, they are much more likely to behave towards your house as you would since you can set 'house rules' that you couldn't with tenants. Plus you can still have your me time, use of the garden etc.

I used to rent a room from a lady who was away every second weekend. Since it was her house and she lived in it too the rules were made clear (things like dishes done after use; how the bathroom should be left etc) and I followed them even in her absence whereas if it had been entirely my place (i.e. as a tenant rather than a lodger) then I would've behaved differently. One of them was that we had a cleaner each week and the cleaner had access to my bedroom to vaccum (which allowed my landlady the chance to see I wasn't letting my room turn to squalor. You might not want to go so far but it really helped our communication about expectations and kept her house safe and well kept.
posted by kitten magic at 5:17 PM on June 4, 2015 [1 favorite]

Renting is sometimes a lot of work. Mostly it's work to get new tenants, and it's work to turn the rental (fix, repaint, clean, etc. between tenants). It can also be unexpected work and expense, like when they call you because the furnace just died and it's 20F outside and snowing. Then it can be pretty much nothing except collecting rent for a few months. And then something happens that requires you to do stuff. Right now I'm turning my rental house so all my weekends in June are going to be spent replacing doors and blinds, patching and painting walls, landscaping, etc. Not fun. And that's when you have GOOD tenants -- bad tenants can turn landlording into a full time job that pays less than nothing.

You also have to be familiar with your local landlord/tenant code, so you know how to legally screen tenants, when and by how much you can raise the rent, and how much notice you have to give, and what fees you can charge and what you can't, and when it's appropriate to withhold security deposit for repairs, and where the smoke detectors go, etc. You can't just make up your own rules, or you expose yourself to liability and litigation. If you are OK with taking on this second part-time job then renting is a good option but if you are not, it is probably better to sell.
posted by rabbitrabbit at 7:18 PM on June 4, 2015

Do you have to decide now? Could you decide to keep it empty for 90 days and see if you really use it for "me time" and if it's a pain to maintain an empty house, then try one of the other options once you see how you're doing with cohabitation?
posted by judith at 1:38 PM on June 6, 2015