Renting out your own home whilst overseas?

March 14, 2006 12:21 PM

Ever rented out your home so you could flee the country?

I’m in the very early stages of considering moving overseas to volunteer for a few years. The biggest issue at hand: I’m not independently wealthy (damn!), so I would have to either sell or rent out my house while I’m gone. Selling seems the most hassle-free option, but I quite like the house and it’s proving to be a great investment to boot. So currently I’m preferring the idea of renting it out and utilizing a property manager to take care of things while I’m gone . . . but I worry there may be complicating factors lurking beneath the surface that may make it more trouble than it’s worth. Has anyone had any experience with this? Have any tips, warnings, success stories? Obviously renting out a home isn’t unique and there’s loads of resources out there. I’m more interested in experience with the twists of it being your own home (i.e. primary residence) and/or the fact you’ll be out of the country and trusting Joe Property Manager while someone else is living there. Other factors that may or may not be important: I’m not looking to make a profit, just to break even with mortgage/association fees/property taxes/insurance/property management fees (anything else I’m overlooking?). I’m also hoping to rent it out furnished in hopes that a. I can charge a bit more to get me closer to the elusive break-even point, and b. I don’t have to mess with moving and storage (very fortunately, I’m not attached to any of my furniture!). It could be I’m worrying for nothing, but I figure this is a good first place to ask around for red flags. Anyone see any? Thanks . . .

posted by globetrotter30 to grab bag (12 comments total)

I rented my loft out for one year while I was overseas in 2004/2005. I used a property manager who charged decent fees for finding a renter at a good monthly price and dealt with making sure that the renter's cheque cleared each month. I was very satisfied until I returned home and saw the damage done to my loft. (Sink faucet ripped out, kitchen cupboard hanging off the wall, huge holes in hardwood floor etc.) When I approached the property manager about this, it was revealed to me that according to the tenancy laws where I live, I can evict a renter for damage, but can't actually make them pay for it - my digging around in all the fine print of the law confirmed this. It was my (huge) mistake for not checking out these laws before I rented out my loft.

I subsequently am just sucking up the costs when I have to leave again at the end of this year and am not renting out my place. SO - long story to warn you to check the tenancy laws of wherever you live.
posted by meerkatty at 1:01 PM on March 14, 2006

. I’m also hoping to rent it out furnished in hopes that a. I can charge a bit more to get me closer to the elusive break-even point, and b. I don’t have to mess with moving and storage (very fortunately, I’m not attached to any of my furniture!).

If you are secretly wanting to throw your furniture away then this will be fine. The renters will definitely trash your house, and your furniture will smell like ferrett musk 6 months after you leave.

This happened to us.
posted by ernie at 1:07 PM on March 14, 2006

My parents did this, they took all the furniture with them when they left, and apart from the one set of tenants having a deep fryer fire and gutting the kitchen (my folks were insured), everything was fine.

:)
posted by lowlife at 1:09 PM on March 14, 2006

I just ended a five-year stint of doing this and wasn't pleased with the results. I didn't use a property manager (mostly because the services included apparently didn't include things like repairs and on-call services), but I would really recommend that you do so if you possibly can. My life was much more complicated because I couldn't use a manager.

The tenants did damage the property, although not always in obvious ways: one tenant stacked wood against the side of the house and brought on a termite infestation (since taken care of), and another decided to adopt a second dog (one was allowed) and not clean up the pet hair. But overall, it was a fiscally smart thing to do.

I also rented the place furnished, which worked out fine. As long as you're not keeping items in the house that you don't care too much about, you'll be fine. I wouldn't act as a landlord again, to be honest with you, but I was in a situation similar to yours and couldn't be in the US to live in the house.

One more thing: it'll affect your tax situation to have the house as a rental property, so do some advance scouting to make sure that you know what you're in for there.
posted by yellowcandy at 1:30 PM on March 14, 2006

Faced with this choice, I just sold the place and used the opportunity to get rid of a lot of extra junk I'd accumulated.

I ended up coming back a year later and buying a house in the same neighborhood. Even got my old phone number back.

I was very satisfied with how it worked out, and I'm very glad that I didn't get bogged down worrying about a rental house while I was out and about.
posted by tkolar at 1:51 PM on March 14, 2006

We rented our house out to flatsharers (through a management agency) against our better judgement and were happily surprised that the house came back to us tidier than we left it. On that basis, I recommend having income to cover your carrying costs.

I would say, globetrotter, that you need to look at the tax implications of this. Renting was a good choice for us because we more than covered our mortgage and enjoyed the capital gain, but US tax law says that in order to sell gain-free you must both own and occupy for two of the past five years in order to get your gain out tax-free. You need to be aware of the implications of this on time-lines. If you plan to be gone for more than two years, you should think about how you will sell the place...as time passes, those absentee years become the base of your ownership calculation, and the difference between paying and not paying the capital gain are substantial.

When I moved overseas for the first time, I sold my apartment. I would suggest to you to think about what your needs and expectations might be like on your return. They may be very different from today, in which case you may find yourself asking, "well, now what?"

Sorry if this sounds like Talking Heads. Perhaps their unsettledness was prescient.
posted by sagwalla at 2:59 PM on March 14, 2006

Just like to support the notion, don't leave anything you value at home. My family left our tools, like shovels, rakes, and what not. When we came back, we found them lying where they were left in the yard months before on their way to rusting to oblivion.
posted by Atreides at 3:05 PM on March 14, 2006

Ripped out sink faucets, ferret musk, deep-fryer fires, termite infestations, rusty rakes, oh my!! Am I the only one out there that would actually respect someone else's property if I lived there?!?

But anyway, thanks to all for the thoughts. I suspected there might be some tax implications but was avoiding thinking about them. Thanks for explaining the capital gains thing, Sagwalla. I've owned and occupied this place for over seven years, so if I'm understanding correctly, I could be gone for the next three years but not longer if I wanted to sell gain-free immediately upon my return. Hmmmm, I'll definitely talk to an official accountant-type before I get too further deep in thought about this, but I appreciate the help getting started!
posted by globetrotter30 at 3:36 PM on March 14, 2006

I am surprised by these negative comments. I live in Australia, where there are similar capital gains tax laws, but had no hesitation renting out our apartment when we moved OS for a couple of years. We found the rent covered the expenses then (even with a 6% manager's fee) and is well in front now 5 years later.
All these people are discounting the notion that you would need to find an alternative investment for your savings if you sell (or watch them dwindle). With real estate you can be fairly confidant in a modest return and exposure to potential capital gains.
If you think about the last 5 or 6 years of growth, imagine how you would feel if you had missed out on that return because you were concerned a tenant might damage a cupboard!
My suggestion is find a competant manager, get them to email you monthly statements and enjoy your adventure.
As for renting furnished, I have been a tenant in both furnished and unfurnished property and feel there is little premium for furniture. The only difference I can see is unfurnished places are more appealing to responsible, have their shit together people, while furnished is more appealing to no cash, no stuff, fly by night people.
Of course, that is a generalisation, but I think you will see what I am driving at. Also, if you furniture is a bit crappy, people won't treat it (and the place) particularly well, but a prisitine residence gives the tenant a high baseline to keep to.
posted by bystander at 9:15 PM on March 14, 2006

The exception to who would prefer to rent furnished places are professionals who move internationally for brief (1-3 years) periods.

In the UK and South Africa, but not Germany, we have been inspected, from time to time, by the management companies with whom we've dealt. I hate that, but that's the way they do it. Not sure if that would wash in the States.

I am always amazed at the stories I hear of tenants trashing people's places. I was lucky when I rented my house. I've had friends who weren't, in the same town. It boggles me how low some people live, and I'm not the best.
posted by Goofyy at 4:11 AM on March 15, 2006

You need to check on the property insurance, if you are no longer living there, it's possibly not homeowners any more. (I got dropped by the insurance company over this, and the letter went to the old house, so I didn't know it for a while, etc.)
posted by unrepentanthippie at 5:08 AM on March 15, 2006

Unexpected illness caused my family to turn management of their apartments over to a professional management firm for a year.

In addition to the management fees, and rents lost to unfilled vacancies that we would never have left unfilled, we came back to find certain units rented to some problem tenants, whose habits caused somewhere upstairs of $50,000 worth of damage (this was in the early 80's).

The total overall out-of-pocket loss was about $125,000, in 1983 dollars.

The point of this is that it is hard to find a good property manager. In your situation, I'd certainly leave the property vacant and hire someone to come in and check on it once a month.
posted by ikkyu2 at 3:16 PM on March 15, 2006