In our previous post “Deciding If We Should Become Landlords: Part 2” we took a look at the potential benefits of becoming landlords. We touched briefly upon the freedoms we may gain both financially and personally, and spent a little time imagining our future possibilities.
However, upon further examination we are still not convinced that becoming landlords would be the right move for us. We have family and friends who have become landlords, and some of their stories are downright scary. We have heard many nightmares from non-paying tenants that refuse to leave, to other outright weird and crazy scenarios.
I’m not so sure that Mr. FE and I could handle having our property destroyed or one day walking in on a snake breeder (true story). In fact, I’m terrified to be around any living creature that has either no legs or more than four. Terrified, I tell you!
But before we allow our imaginations run on a wild escapade, we must first take a look at the numbers. Below is a simple spreadsheet I created to get a general idea of where we may land if we were to turn our property into a rental.
|Estimated Monthly Profit|
|Rent||$3,000||We used the average of both estimates from our realtor stated in the previous post|
|Mortgage/HOA dues||-$1,559||We created a separate line item for our property taxes for purposes of discussion|
|Property Tax||-$354||Property taxes in New England are insanely high!|
|Insurance||-$53||This is a rough estimate from our insurance agent|
|Management Fee||-$300||We used the average for our area which is 10% of the monthly rent|
|Vacancy||-$300||We used the average of 10% of the monthly rent|
|Repairs||-$150||We used the average of 5% of the monthly rent|
|Estimated total profit||$284||Net profit|
Unfortunately, $284 is a very small profit. Worse, this is the estimate before taxes so we more than likely stand to make even less. Then after we add in our imagined scenarios like having a tenant spray paint our walls and floors with orange stick figures, our number looks downright horrible.
So after much deliberation, Mr. FE and I have decided that becoming landlords would not be the right move for us at this time. We believe our energy is better spent looking for another alternative to increase our passive income. However, we are willing to reconsider this option after our mortgage is paid off or if the real estate picture changes.
For us, becoming landlords doesn’t fit our current desired lifestyle. We treasure our quiet times and avoid drama. We enjoy taking off on a weekend with little notice to seek out the natural beauty of the mountains and pristine lakes that surround us. Thus, becoming landlords no longer appears desirable to us. However, we will continue to seek out ways to increase our passive income in order to secure our financial future.
Do you believe we arrived at the right decision? What are your thoughts on becoming a landlord?