Can't sell that condo? List it as a rental.
It's not a slam-dunk proposition, certain conditions are required to make for a good rental property, but the option could be an alternative in today's changing market -- if only temporarily.
Speculators are bailing out of the once super hot condo markets and some potential first and second-home buyers, thwarted by higher energy costs, are opting for the rental market instead.
As a result, condo inventories are rising and the sector is turning around faster than the single-family detached home market.
In June, single-family home sales were down 8.2 percent from June 2005 as the median price came in at $231,500, up 1.1 percent from a year ago, according to the National Association of Realtors.
Meanwhile, during the same period, condo and cooperative housing sales fell harder, by 14.6 percent and the median price was down by 2.1 percent to $226,900, the association reported in its latest monthly tally.
In metropolitan areas, where rentals may be more viable, market conditions reversed a pricing anomaly that had the median condo price higher than single-family price for more than two years.
NAR's second quarter "Metropolitan Area Existing-Home Prices and State Existing-Home Sales" revealed a $227,500, median price for single-family homes in 151 metro areas, up from $219,400 a year earlier. Condo prices in 57 markets, on the other hand, were at a median of $225,800, less than the single-family median for the first time since the first quarter of 2004 and down 0.3 percent from a year earlier as 14 markets revealed price declines.
The national condo price had been higher than the median single-family home price, NAR said, because of a high concentration of condos in the most expensive metropolitan areas included in the report. Generally, within a given broader area, the typical single-family home costs more than the median condo price.
The metro core condo concentration has been caused by reduced land availability; the need for more practical, affordable, and high-density housing as well as high-end condos; the anti-sprawl movement; and the cool factor -- young professionals want to be where the action is.
NAR spokesman Walter Molony says price-boosting demand for condos can also be traced to capital gains tax relief beginning in 1998 and empty-nest baby boomers moving down or buying a second home, but seeking appealing amenities. Also, during the last housing boom, condos were selling like hot cakes to speculators and investors.
Some of the same market conditions that are reducing buying demand for condos can be used to turn a failed sale into a condo rental for the long term or shorter term vacation rental.
"Renting out your house by the night or by the week while it's on the market can help cover your expenses until the house/condo sells. It's easy, inexpensive and effective way to market your home," says Christine Karpinski, real estate investor, author and director of Owner Advocacy for HomeAway.com, a network of vacation rental listing websites.
Given the high cost of housing in many regions some potential buyers are turning to rentals and generating a greater demand in the apartment and home rental market, but that's not true of all markets faced with a supply glut.
"New condo owners who are counting on renting their properties to vacationers should be prepared to work harder than might have been necessary even a year ago," said Emily Glossbrenner a partner with Yardley, PA-based FullyBookedRentals.com, a website for resort and vacation rental owners.
"Property owners who used to fill their available weeks by advertising on three or four of the leading vacation-rental sites are finding that they have to expand their advertising programs and pay a lot more attention to their ads in order to stand out from the competition," Glossbrenner said.
Obviously, location is key. If your home is along the railroad tracks it will appeal to only a few hard core renters who like edgy locations. Beach front, hillside, ski resort and lake front homes will appeal to more renters, especially those looking for a vacation getaway. Urban living and rural seclusion will also attract a cross section of renters.
In all cases, safety and security must also be included in the appeal.
"It also needs to be safe -- from man-made or natural disasters. Trying to create an attractive rental from the property you buy that is sitting on an eroding cliff overlooking the ocean just won't fly, no matter how beautiful the view. Ditto if the potential for flooding from high tides or rivers is present," said Amanda Sturges, director of operations at Escape Homes, a San Francisco Bay Area online clearinghouse for vacation rentals, real estate agent specialists in vacation markets and other industry services.
Karpinski, also author of "How to Rent Vacation Properties by Owner: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment" (Kinney Pollack Press, $26), is a proponent of do-it-yourself property management to save on a major carrying cost found in prime rental markets. Property management companies can charge as much as half the rent for services in some markets.
But where property management costs aren't prohibitive and renting is viable or where the potential rental is just too far away and simply too time-intensive to manage yourself, a property manager can be a lot like a stock broker.
In addition to thoroughly screening tenants, property managers have at their beck and call vendors and working relationships with other professionals to help them quickly perform a host of maintenance, repair and upkeep chores.
"You can also use the analogy of stock investing. Many investors use a full service broker because the experts are better at managing the investments than are the investors. And in the long run, the investor makes more money even though the have to pay the fees," said Terry Feinberg, vice president of the Arizona Multihousing Association in Phoenix, AZ.
Finally, know your demographics. The home itself should have a certain level of attractive features and amenities and be in the kind of condition that will quickly attract renters.
For example, kid- family- and pet-friendly rentals get contracted sooner if they have swimming pools, spas, hot tubs; roomy, modern kitchens and family rooms and ample outdoor spaces.
Likewise, couples may want a rental with a cozy nook. Universal design elements and special amenities like free cable, computer hookups and cable outlets appeal to a broader cross section of renters.