With the housing market still not booming, many people whose home has been on the market for months without promising offers are looking to rent their home instead of selling at a loss. Many homeowners who were looking to sell face this problem because they bought a new home before being able to sell their old home or they bought a second home as an investment property and with the economic downturn can no longer afford to float two mortgages. Some homeowners are finding that being a landlord is not as easy as they imagined.
Many adults these days, have rented an apartment in the past, but you may not have considered everything that goes into selecting you as a tenant for a property. Many property owners use real estate agents to rent their properties that conduct background and credit checks. They may also ask for references from your previous landlord or property owner. You may have found that you had a good or bad relationship with your landlord. Before you decide to become a landlord, you must realize the legal responsibilities and financial expenses attached to the job. You could also think you have selected the perfect tenant, but then you find yourself constantly wondering where the rent check is or receiving phone calls to replace light bulbs or other tasks not outlined within the lease agreement. Of course there is money to be made in the rental market, but there are also costs attached and you need to be sure that the costs of maintaining your property do not exceed the income you are receiving from the rental of your property.
Your original goal was to sell your home, but you do not want to sell at a loss, so you decide to rent. One of the problems you may face is how long should you rent for? When will the housing market bounce back, making it a good time for you to sell. You will have to consider whether you want to keep your house on the market, while renting. If you decide to do so, you need to be open and upfront with the tenant that there is a likely possibility of the real estate agent needing to show the house. You would want to have these provisions clearly outlined in your lease agreement. If you are going to continue to show your home, you would want it to be clean and inviting for potential buyers and you would have to discuss this with your tenant. Another issue you may be facing is how long should the tenancy last for? Do you want to rent on a month to month basis, a 6 month basis or for a term of a year. Having a year of guaranteed rental income may seem ideal, but what if you want to sell the property within that year? Or maybe a month to month tenancy seems like a good idea, so you could have the tenant out with only a months notice, but then you risk them leaving after a few short months and having to find another tenant. These decisions should all be carefully considered and the lease agreement should be drafted by a lawyer to help you protect yourself, have terms that are agreeable and fair to both parties and upholds your legal responsibilities.
One thing that you must consider before renting your property that you eventually wish to sell in a better housing market is that renters typically do not treat rental properties as if they own them. Renters may be likely to ignore little problems that can turn into expensive, bigger problems because they know that they are only living in the property for a limited time. You may have to repaint, replace carpet, strip wooden floors or make other repairs before you are able to put your home back on the market. Not only does money play a factor into all these repairs, time also does. You may not have the time or the expertise to make repairs necessary for the property. You may also no longer live near the property, so it may be a good idea to hire a property manager. Although this will dip into your income you receive from the property, it can help you out in the long run. The property manager can be in charge of collecting rent, and dealing with tenants complaints and concerns. The fee for these services is usually 8-10% of the rent per month.
If you choose to become a landlord, make sure you are protecting yourself legally. Consult a lawyer from matters such as the leasing agreement and be aware of the housing code in your state. Most states have a landlord tenant handbook, which outlines responsibilities of both parties. Be sure to document everything that happens with the property and the tenants, keep accurate records with dates, descriptions and pictures of the property. Renting your property is an alternative to selling at a loss, but be sure to carefully weigh the decision to do so.
Latest posts by Emily (see all)
- Selling your house at a loss vs. Renting it out - March 7, 2012
- The Federal Student Loan Rate is Scheduled to Double - February 20, 2012
- Preparing for a Job Interview - February 14, 2012