Rental Income

iVillage Member
Registered: 04-10-2003
Rental Income
6
Sun, 04-28-2013 - 8:45pm

Hi everyone,

So I had an incredibly uneventful weekend (catching up on much needed rest from all of the insane hours I've been putting in as of late). The good news is that I spent the day getting my house organized and cleaned up so I feel better.

I also spoke to mom and sister and we are going to bring the dogs on our roadtrip in two weeks. Usually my mom would stay with them, but she will be with us. I looked into a dog kennel and there is no way I could leave them there. The cages were so small (even the supposed "large" for two dogs) which means I would have to pay for two cages. this is $58 per day and includes no walks or play time (they get let out 3 times a day to pee and thats it). If I want walks or play time it will be closer to $80 per day!!! That's more expensive then my hotel room!! Egads! BUT the good news is that the hotel I want to stay at allows two dogs of any size at no additional charge . . . so we're road tripping with the mutts! That's a HUGE savings!

But, back to the title of my post. I was playing with some numbers this weekend to try and figure out how to best approach the debt and school situation . . . and I think I am going to rent out my basement. My basement is finished but is in rough shape so I never use it (except to go down for laundry or to get in the freezer). It would need some work to be rented out (a bathroom, new carpet and a wall to create a bedroom, new paint etc) but it has a separate entrance. I wouldn't put a full kitchen in (just a kitchenette) and would have to share the laundry room. I think I can get it done for between $10-$15K. Once done the place will rent for anywhere between $650 and $750 per month.  So my plan/ backup plan is as follows:

Plan A: Stay the course with my debt repayment and wait to see if I get a bonus, and what it is. It could be anything from $0 to as much as $13k depending on how the year ends. If I get the bonus I will fund the renovation with that and rent out starting 2014. All rental income will be used to pay down debt and then save for school. Under this plan I will be debt free by the end of 2014.

Plan B: Use the LOC to fund the reno and then use the rental money to pay it off. I would continue paying what I am now on the debts and would be debt free halfway through 2015. This is important to me as I would be going back to school full time late 2015 or 2016. This would mean I would have no debt and would have a rental income to help support me through school.

And if my life situation should change, the redo of the basement would increase the home value by almost $35K (I had a realtor who is a friend of the family assess it for me) so it would make up for the cost if I had to sell. Or, if necessary I could move into the basement for a year and rent the upstairs for $1500 a month which would cover the mortage and property taxes.

Either way I think its a good idea that won't cost me much in the short term but could be a huge source of revenue for the next few years. I like having a plan! It makes me feel so much better about life!!!


Bex -

iVillage Member
Registered: 10-09-1999
Tue, 05-07-2013 - 11:24am

Oh, I think this is a great idea!!  I have a friend who is now single, but she remodeled her basement & rented it out in Montana, then she bought a 4 plex in Florida, rented out 3 units & gets to live in Fl basically for free because the 3 rents on the 4 plex pays for her place in FL & she can go back to MT anytime as well.  It is a little different because she is single, but she travels a lot for work & it enabled her to get to FL to enjoy the sunshine!!  I am envious...mostly about her taking the risk to move forward in her life!  I am so conservative that sometimes taking risks looks very enticing!!

Certainly be careful as you move toward this plan but I say go for it!!

cindylee

iVillage Member
Registered: 10-01-2008
Mon, 05-06-2013 - 2:24pm

I like that idea.  Just do your research (which I'm sure you will).

Good Luck!

Community Leader
Registered: 08-25-2006
Mon, 04-29-2013 - 1:10pm

My thoughts are that if spending $15,000 adds $35,000 value to your home, then in big scheme of things, it makes sense.  

As far as day to day stuff, I tend to look at "what is the worst case scenario?"  I suppose the worst here would be that you spend $15,000 and can't rent it out.  

If you can afford to spend $15,000, even if under the worst scenario of no rental income, then the added value to your home may be worth it.  

In other words, if you do the reno and Murphy's law hits, is it still worth it?  Can you afford to be it be empty from time to time?  Can you afford a bad renter, whether it be they don't pay or cause damage?  Does it change your homeowners insurance rates?  

If you can afford the reno and don't NEED the rental income, than it probably makes sense.  Just make sure you plan ahead for bad renters.  My SO just helped out a friend fix up a house where they rigged up the furnace, guessing having to do with drugs, and since the heat was off the house got all moldy.  Our friend messed up the paperwork when he asked them to move out, they took our friend to small claims court and won!!  They damaged his house and he had to pay them over a technicality.  

Not trying to scare you off here from renting, just saying be carefull and plan ahead.  

Serenity

Serenity
iVillage Member
Registered: 04-10-2003
Mon, 04-29-2013 - 11:32am
Totally agree. In fact, I decided to move the car over to the LOC when I have the room to do it so that I can own the car free and clear and continue to motivate myself. Then, if I don't get a bonus, I won't do anything until I pay off the LOC leaving me with only the Student Loan. If I do get the bonus it wont' come until November anyway and by that time the LOC should be close to history! My really really stretchy stretch goal is to move the car over to the LOC and pay off the LOC by the end of the year. Like I said major stretch, but you never know :)

Bex -

iVillage Member
Registered: 11-14-2008
Mon, 04-29-2013 - 9:52am

Hi Bex,

I don't think this is a bad idea. I think it is a good idea. However, I would have liked to see you reduce your debt by at least that much before you make the plunge on this one. It will make you income in the future and if you can keep someone in there for two years it would pay itself off. 

I just wanted you to get a bit further or at least pay off one of your current debt sources before you did this. You will do this soon so maybe planning is not all that far off?

Good luck.

Avatar for turtleemom
iVillage Member
Registered: 07-25-2007
Sun, 04-28-2013 - 11:27pm

I have no advice on the rental, but wanted to wish you a great time with your dogs on vacation.  I hear you on pet sitters.  I found a friend of a friend who dog sits and is $50 for both per each  24 hours.  They are in a home, fit in with her dogs, get play time outside several times a day,and I get photos.  They are crated while she is out, but they are crated at home while I am out too. While it is expensive, the dogs have a good time and its the next best thing to having them at home.  I couldn't enjoy a trip worrying about them.  Hope yours enjoy the trip.:)  I look foward to the time mine are ready to travel.