Renting a home when it fails to sell rarely benefits the seller. Typically the result is additional cost along with the often stressful experience of being a landlord. It’s easy to understand the appeal; wait out the market and find that buyer that “appreciates” what makes this home so wonderful. Unfortunately, renting a home instead of selling it typically just delays the inevitable and adds little more than stress to the seller’s experience.
Being a landlord is more involved than people know. Rent loss, possible legal issues, damages, being “on call”, unexpected costs…have to be carefully weighed against the obvious: Will prices increase enough to make it worthwhile? Unfortunately for the vast majority of owners, the answer is no.
Renting is usually predicated upon some or all of the following expectations:
- Prices will increase
- The "right" buyer has yet to come along
- Renting will be a short term fix
The end result however is usually a home that needs to be relisted, updated and have an expired listing (or two) explained by the seller. Something many sellers don’t recognize; the history of the home will show it was listed, failed to sell, rented and relisted. The question that begs to be asked is “If it didn’t sell last time at X, why is it now worth X+10%? It’s a year older and been rented”. Don't simply answer "the market is better" because those national headlines don't likely correspond to the local area - or that home would have been sold already.
And never - ever - lose sight of the things that an owner never thinks about but clearly should. Consider:
- Finding and qualifying the renter
- Preparing the home and contracts
- Liability insurance as a rental
- Tax consequences
- Creation of an LLC to minimize legal disasters
- Rent collections, late rent o evictions
- Landscaping, maintenance and repairs
- Management fees or personal time spent
- Repairs/updating after vacancy
There's a reason for the term "reluctant landlord"; in most cases this idea looks and sounds good but in practice doesn't usually end well. There are additional legal concerns as well as disclosure items that need to be addressed when relisted. Also, don't forget to consider the financial impact on the "next" move; that home remains a debt despite the rental income.
There's much more to the question of should you rent your home when you can't sell it, click on that link for the complete article. In the end, most sellers will find that when all was considered, selling is usually preferred over renting.
THE HANK MILLER TEAM COUNSELS HOME BUYERS AND SELLERS IN THE ATLANTA AREA WITH OVER 25 YEARS OF SALES AND APPRAISAL EXPERIENCE.