In “Deciding If We Should Become Landlords: Part 1”, we examined whether or not we could conceivably become landlords and assessed the marketability of our property. After careful self-analysis, we concluded that our property does indeed have the potential to become a rental property.
However, neither of us know much about the current rental market, and have only a vague idea of what our property would be worth if we were to turn it into a rental. For this very reason, we decided that we should follow-up with what we deduced by seeking an opinion from a professional. We also know that it’s a frivolous waste of time, like me trying to figure out what Mr. FE’s toys are supposed to do, and there is no point in philosophizing without the assessment of an expert.
Thankfully, we made the right decision and it was determined by our knowledgeable realtor that our property would absolutely fit the bill as a rental. Even better, we were told that our property would most likely be in high demand given the present condition, and our close proximity to a major commuter highway. This was really great news!
But what about the numbers…
We were told that our property would most likely fetch a rent somewhere between $2800 to $3200 per month for the area where we live. Unfortunately, we were expecting this to be a little higher. The reason why the rent came in lower than our own estimation is because we are competing with a new wave of home buyers. It turns out that Boston, MA has experienced significant inflation on rents recently, and renters are now fleeing the city and making their way to the suburbs. You would think this would help us, but given the still low-interest rates most of these people are opting to buy instead of rent.
The good news is that this passive income of $2800 to $3200 estimated per month should more than cover our $1913 mortgage/HOA payments, and does yield a profit (before taxes, insurance, expenses, etc.) of 46 to 67 percent. Not bad considering that we have 13 1/2 years left on our mortgage.
We also need to take into account the tax deductions for placing the property in service, managing it, and maintaining it. Here is a quick snapshot of some of the items we will be able to deduct if we decide to become landlords:
- HOA dues
- Cleaning and maintenance
- General repairs
- Property taxes
When we take the monetary equation out of the picture, we see other benefits of becoming landlords as well. Some of these include, but are not limited to:
- The freedom to move to our dream location. We have been discussing the possibility of moving to Lake Winnipesaukee in NH. Our desire is to live close to the lake and have direct access to the water. Plus, we like the idea of being surrounded by mountains. Having passive rental income would make this move far more affordable, especially after the mortgage is paid off.
- The freedom for us to enjoy slow travel. We have on our bucket list an aspiration to travel the world and visit places in Europe, Asia, and the Pacific Islands. The rental property would allow us to travel freely and stay as long as we choose.
- The freedom to run our own schedules. We have been looking forward to breaking free from our 9 to 5 schedules for quite some time know. It would be a huge benefit to be able to retire early, have this passive income, and not worry about being feeling constrained by our current daily regime.
As is currently stands, becoming landlords could fit our desired lifestyle. We should be able to find tenants with ease based on our property location and condition. The estimated monthly income (before taxes, insurance, expenses, etc.) should more than cover our mortgage/HOA payments, and we do see a chance to make a small profit. We are also taking into account the passive income this rental could provide us when we are fully retired.
There is a lot to consider and in our next post we will be addressing the cons of turning our property into a rental. There is so much for us to look at, and thus far, this exercise has been a worthwhile one for both of us.
Are you currently a landlord? If so, have the tax deductions helped you? If not, are you interesting in becoming a landlord?