For Rent Sign in Front of Home

Even with housing prices rising in the Dallas Fort Worth Metroplex, many homeowners are still unable to sell their houses. Many of those impacted have refinanced or did 100 percent financing, others are simply in pockets of homes that have seen a correction over the past few years.

Either way, they are unable to sell at a price high enough to cover the mortgage and the closing costs. That leaves the homeowner with a couple of choices. Take to house off the market and wait a couple of years for some more appreciation or consider leasing the house.

Leasing and property management is not right for all homeowners.

If you are considering leasing your home, the first step is to do the research. You really have to know the numbers to make sure that leasing makes good financial sense. You need to know the following:

How much rent you can reasonably charge? A local real estate professional should be able to give you details on comparable leases in the area. I usually advise clients to work on an 85 percent occupancy rate meaning the property is only leased and generating rent 85 percent of the year. On a monthly basis, simply use 85 percent of the projected rent as your base rental income.

How much are your monthly costs (including the mortgage, maintenance, taxes, insurance, HOA dues)? It is critical that you accurately project these costs. Not only are there expected monthy costs, but you have to factor in maintenance and repairs as well. I usually recommend a Residential Service Contract for houses I manage.

How much will it cost to lease? You can advertise and lease it on your own or you can hire a real estate professional to market the property for you. Real estate professionals usually include tenant screening and lease preparation in addition to marketing the property. If you decide to go it alone, you need to figure in the costs of advertising, tenant screening, and document preparation. Proper and legal leases become critial if you have to evict or take other legal action against a tenant.

How much is ongoing property management if you decide not to manage it yourself? Like everything else, the cost to have professional property management varies. Cost is not the primary factor in my opinion. What you’re looking for is a company that will find good tenants and take care of your property.

Once you know the potential income and expenses, you can do the math. Most of our owners are generating positive cash flow from renting their houses while they wait for housing prices to climb some more. Others are losing money each month, but they have decided that losing a few hundred dollars each month is better than selling at a loss or facing foreclosure.

As mortgage approval criteria tightened, the demand for lease and rental homes have risen along with it. Not only is demand up, but rental and occupancy rates are climbing as well. If you’re having problems selling your house, you might want to look into leasing it.

Tom Branch, Broker, CDPE, SFR
Source: http://www.thebranchteam.com/wordpress/2011/07/10/having-trouble-selling-your-house-consider-leasing/

 

Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton.  While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure.  Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.

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Important Notice: The Branch Team with RE/MAX Dallas Suburbs is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.

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14 Comments on Having Trouble Selling Your House? Consider Leasing.

JUL
10
2011

Good suggestion. We are in the Desert area of California and we were having difficulty selling a beautiful pool home mostly because the owner had made costly improvements to the property and the developer was competing with the same model at much lower prices. So we leased the home for our client for 2 years. The tenant is happy,the owners are elated.Leasing does work.

David Lang
1:33pm • #1
948,361 Points 8 Featured Posts Outside Blog Called Shot Master

Thoughtful post...may work well in some areas, not in others.
1:38pm • #2
107,533 Points Outside Blog

Im renting a new $359,000 home for $1500 mo. It was on the market for 600 days and then the developer who financed the builder decided it was time to get some return for his investment.
1:41pm • #3
228,813 Points Called Shot Master

Interesting just read another post where the agent said NO to leasing if your home didn't sell.  Love to read different opinions.
1:53pm • #4
309,748 Points 28 Featured Posts Outside Blog Called Shot Master

Leasing can make sense if it can provide a true break even, or if the owner can afford any additional negative cashflow.
2:16pm • #5
1,023,989 Points 66 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Great suggestions.  I am VERY glad I have kept up with my marketing efforts to attract new property owner/clients!  I need properties * My inventory is very low and there are GREAT rental prospects out there who need rental housing!
2:28pm • #6
238,110 Points 1 Featured Post Attended Rain Camp

some homeowners are very open to it and some are scared to do it.

They worry if the tenant will take care of the property.  I mention to them the screening process and they get a little comfortable about the idea.
4:22pm • #7
379,175 Points 5 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Tom, 

I need properties, too!  Lease demand is high.  Prices are up and for SOME leasing out the home they cannot sell is a good option - not all!  

Great blog post!  Another way to look at it is as an investment option of not having all your retirement in the stock market!  

All the best, Michelle
7:46pm • #8
881,844 Points 10 Featured Posts Attended Rain Camp Called Shot Master

This is surely a good option for many sellers - except that they would like to see levels of 2005-6 in next 2 years of so - which all of know, will not happen.
8:06pm • #9
315,207 Points 2 Featured Posts Attended Rain Camp Called Shot Master

There are many current home owners doing just that.  Ive had several home buyers recently who are converting their current home to a rental once they move into their new home.
10:12pm • #10
JUL
11
2011
1,023,989 Points 66 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Daniel has a good point....many lenders of NEW construction want the interest paid on their loans and are requiring builders to lease out the properties to make sure they are MAINTAINED and the loan interest is PAID
7:26am • #11
1,208,022 Points 193 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Just alot of factors to ponder in the "unwilling" landlord's game. It is a solution to some, but not most people who are NOT financially strong to begin with. You're right, it's not for everyone.
9:36am • #12
JUL
12
2011
413,712 Points 88 Featured Posts Localism Sponsor Outside Blog Called Shot Master

I chuckle a little when a listing client threatens me with "if I can't sell for my price I'll rent it out". Very few think through the implications of having a renter in the home.
1:03am • #13
121,673 Points

Good post Tom. I agree with most who say it is not for everyone but for some people it is the perfect way to go. Rentals in Coral Springs are in demand right now and so is property management.
7:57pm • #14

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