In Al’s final post of his 3 part series on incurables, he discusses the option of renting your home. Is that the right choice for you?
Real Estate Incurables – Part 3
The third option to consider if struggling to sell your home, as noted in Part 1 of our blog post on incurables, is renting.
The realtor’s first responsibility, when a client considers renting as an alternative to selling, is to question their reasoning. If the homeowner’s thinking is to wait until prices are on the rise, then that is certainly logical. Providing, of course, that the seller is in a position to do so – financially and otherwise.
Cutting Off Their Nose
Often, however, the homeowner makes such a decision while engulfed in emotional frustration without really thinking through the repercussions. Hence, they make the decision to rent out of anger and end up “cutting off their nose to spite their face.” Since 2007, when the rhythm of the real estate market changed, we have had a number of clients make the decision to rent “until the market improved” only to realize that it wasn’t really in their best interest to do so. Consequently, they placed their home back on the market after renting for a year and sold it at a lower price then they would have had to the previous year.
Some Considerations to Selling vs. Renting
The realtor who fails to have a open, honest and insightful discussion with their client essentially absconds their obligation. Some things to consider for any homeowner who is weighing the option of selling vs. renting:
- Can You Afford to Rent – How much of a loss can you afford to take if the rent doesn’t cover the monthly mortgage payment?
- Can You Afford to Sell – If your home is worth less than your mortgage, do you have the cash at closing to satisfy the loan immediately?
- Tax Deductions - If you need additional tax deductions, you may be able to write off the loss and costs from rental properties.
- Is a short sale, whereby you sacrifice your credit score for years, a viable option?
- Time Constraints - Do you really have the time to attend to all the nuances that are involved with being a landlord.
- Will you rent your home furnished or unfurnished and what are the consequences of each?
- Wear and Tear – One thing you can be sure of, a tenant is not likely to care for your home the way that you do, and the wear and tear that he or she places on your home is likely to negatively affect it’s value.
- Cost – Be prepared to spend thousands of dollars on repairs upon the expiration of the tenant’s lease.
The bottom line is that, unless you are truly in a position to rent your home until prices in your area begin to climb, renting is a risky business.
This post is brought to you by Renee Daley, your real estate expert in Fairfield and Southport Connecticut. Please contact me if I can help you with any of your real estate needs.