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Should I rent my house till the market gets better? Things to consider.

By
Real Estate Broker/Owner with Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ

In today's real estate market many Owners are finding that they either can't sell, or might have to sell at a deep discount. Many are, therefore, turning to renting as a possible alternative to a bargain basement sale. (I'm talking here about non-occupied properties. We have many in our area- either they are 2nd homes, investment property that isn't selling, or the Owners have HAD to move for some reason).
These are some of the issues we raise with Owners who come to discuss it with us:

-Can I AFFORD to rent my house for enough time for the market to recover?
    -At least in our area (Payson, AZ) the market is not likely to turn around for at least a year, maybe 
      longer
    -Possible rent may OR MAY NOT be enough to cover your mortgage payment
    -a reputable Property Management company is not going to give any refundable security deposit
      from the Tenant to you, so don't count on that money. It will probably go into the company's trust 
      account until the Tenant moves out.
    -Do your homework and find out how long it takes comparable properties to rent, and for how much $.
    -Can you make the payment if the house doesn't rent for a few months, or if the Tenant leaves and 
     the property takes awhile to re-rent?
    -Can you make any necessary repairs to make the place safe for renters?
    -Can you do any fix-ups needed to make it "rentable"?
    -Can you do necessary maintenance while the property is rented? What if the water heater goes out?
    The furnace or AC? What if there is a plumbing or roof leak? Can you repair/replace necessary items?
 
-How "rentable" is my house?
    -How much competition is there in your area for quailified Tenants? (Believe me, NO Tenant at all is
    much better than the unqualified kind)
    -How easy it it to rent properties in my neighborhood? Ask a good Property Manager.
    -Is the rent amount I want/need reasonable? Again- ask a professional.
    -Am I willing to allow pets? (people LOVE their pets, no pets makes a place less rentable)
    -If you want to leave your house on the sales market Tenants will NOT want to rent it. You
    will probably have to give them lower rent or other concessions to get it rented. And the Tenant
    CAN and may "blow the sale" with any prospective Buyer. Better to take it OFF the sales market.
   
-How ready am I to give my house up to Tenants?

    -How emotionally attached are you? I guarantee you will have at least normal wear and tear.
    -That "accent" wall you love may make the house harder to rent.
    -Are you willing to allow children? Fair Housing violations are VERY expensive.
    -Once the property is leased you CANNOT come on the property except with proper notice.
    -You MUST comply with any and all national, state, and local laws regarding rentals.
  
This is not intended to be a comprehensive list of things to consider. It is intended to get you thinking. A good (read "experienced") Property Management Company can give you information particular to your area. If you decide to rent out your house we STRONGLY recommend letting a professional handle it. Mistakes (letting in a Tenant who can't pay, tears up the house, makes a meth lab, fills it with illegals, etc.) can be very expensive.
Renting CAN be a viable option- don't let this scare you off. Just be aware of the possibilities and
TALK TO A PROFESSIONAL!

AR people- what would you add?

Posted by

Leslie Prest, Prest Realty                                      Find us with Payson info on Facebook and Twitter
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Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

 Thanks for stopping by, all.

John- we're seeing the same- we're telling some Owners at the middlerange that their house may ne hard to fill- too much competition.

Cyndee- we're a small town about an hour's drive north of Phoenix. The market has gotten WORSE here, not better, but prices sren't coming down too dramatically, at least no across the board.

Josue- For many Owners that IS a bette solution- I agree.

Randy- Payson sales are slow, and rentals are definately slowing also,

Kathy- we're mainly talking to people with non-Owner occupied properties. There are a LOT of these in Payson.

Property Connections- We tell Owners selling and rentin AT THE SAME TIME is a bad ay to do both.

Jul 26, 2008 06:53 AM
Troy Erickson AZ Realtor (602) 295-6807
HomeSmart - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

With the new lending restrictions, there are also fewer people qualifying to buy homes.  Many of these individuals may have great jobs with good credit, and are looking to rent a home.  I have worked with several individuals who have decided to rent a home instead of an apartment, so there are renters out there.  Also, the trend in our market is that rent is going up.  A homeowner should be able, in many cases, to have their mortgage paid for and then some, by a renter.  That way, they wouldn't have to walk away or short sale their home, and could possibly wait for a turnaround in the market.

Jul 28, 2008 08:25 AM
Christina Williams. REALTOR® TN property search & local insights
First Realty Company - Crossville, TN

Great advice Leslie.  I'm noticing more and more for rent signs and listings turning into rentals this past year.

Jul 28, 2008 08:38 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Troy- WE have no shortage of potential renters, but the rents here are coming down a little due to competition increasing.

Christina- we're seeing more and more Owners asking us about renting.

Jul 29, 2008 05:30 AM
Mary Jo Schaffer
Sweetheart Realty - Bandera, TX
Bandera Texas Real Estate

Leslie,, Good post- it's important to let owners know about their insurance coverage on their  home and that insurance companies frown on vacant properties and could cancel their policies.

Jul 30, 2008 09:21 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Good point, Mary Jo. Even with the longer term rentals we deal in the ionsurance companies sometimes have stipulations, and sometimes raise rates.

Jul 31, 2008 05:16 AM
Florida Private Golf Communities
Golf Life Properties, LLC - Palm Beach Gardens, FL
Finding Home Never Felt Better!

Fortunately in our area, we're able to also offer short term rentals where rental rates are higher than long term rates, but all of the points in your post still apply.

Jul 31, 2008 03:15 PM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Thanks for stoppingby, Nikisha. We've stayed away from short term, too much work.

Aug 03, 2008 03:58 PM
Amy Salisbury
Leading Edge Properties - Charles Town, WV
West Virginia Realtor/Jefferson/Berkeley

Hi Leslie,

We are also dealing with many of our homeowners opting to rent their vacant homes for a year at least.  The sales market is so glutted right now that this has become a good option, especially if they can garner enough rent to cover their mortgage. 

We have an extremely competant property manager with years of experience and her business is growing like crazy.  Part of our goal when starting our brokerage 2 years ago was to offer this service since no one in our county was handling true property management.  

Your thoughtful post echoed many of the elements we discuss with our homeowners.  Thanks for writing it so well! 

Aug 05, 2008 11:30 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Thank you, Amy. how nice of you to be complimentary. I'm amazed that more people in our area are NOT doing property man. as we are about up to what we can handle.

Aug 06, 2008 10:17 AM
Jan Wood
None - Gallatin, TN

Leslie:  Thank you for this timely post.  I have a seller who is considering renting her home and keeping it on the market.   I have one renter who is a real estate agent in Maine who would like to rent it and said we could keep it on the market for sale.  I think this is pretty odd, myself, and have been trying to figure out her logic.

Aug 06, 2008 11:44 AM
Deb Jobin
RE / MAX River's Edge - Bristol, RI
Award-Winning Realtor

I have found that rentals are just as hard to get rid of as listings.  There are soooo many of both.  I have been suggesting my rental folks to lower the rent, but in some cases they can't because they need a certain amount to meet all expenses.

Aug 06, 2008 12:03 PM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Jan- It IS unusual for someone to not mind it being for sale. At least the renter is an agent, so maybe a little easier to check out than most. 

Debra- We don't seem to have a shortage of renters, but they ARE negotiating rents more than they use to.

Aug 06, 2008 12:23 PM
Jan Wood
None - Gallatin, TN

Leslie:  The first thing out of my sellers mouth was "I don't want any kids in here".  Ooops!

Aug 07, 2008 12:55 AM
Andrea Tsakanikas
KT Consulting International, Inc. - Fort Lauderdale, FL

Not sure if you are in a resort area or get seasonal renters during the winter.  But in South Florida I was extremely successful in obtaining HUGE premium rents for short term furnished rentals.  They may want to consider leaving the home furnished for the winter months and obtaining sometimes three times the amount of an annual monthly rate for short term.  Just an option to consider in such challenging times.

Aug 07, 2008 02:17 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Jan- we get that sometimes too. I tell the Owners "I didn't hear you say that" and then explain fair Housing and how large the fines could be. They back off.

Andrea- we are so busy with long term rentals that we stay away from those on purpose. Yes, we could (and Owners could) get more rent for those months, but then if the property sits vacant the rest of the year they aren't really making more. We have no shortage of people wnting to rent longer term. Less work for us this way, too.

Aug 07, 2008 04:43 AM
Tanya Venable
Orlando, FL
SEO, Mobile SEO, and Internet Marketing Consultant

Leslie - great post! There definitely is alot for a homeowner to consider before going this route. Thanks for sharing!

Aug 08, 2008 12:59 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Thanks for stoping by Tanya.

Aug 09, 2008 06:04 AM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Leslie, Short answer is yes. Don't settle for less right now, things will get better. But if they have sufficient equity they need to consider their exemption for capital gains. They don't want to risk losing that by renting it out for too long.

Bill Roberts

Sep 14, 2008 07:31 AM
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Good point, Bill. If they rent "too" long they could possibly move back in for the right amount of time before they sell at some future time.

Sep 15, 2008 05:23 AM