Renting your home until the market turns around can be a good financial move, if you don't need the equity right away to buy another home. One option for cash-challenged buyers who keep the old house as a rental is to get a no- or low-down-payment mortgage.
- But before you decide to become a temporary landlord, crunch the numbers to see if the rent will cover your mortgage and other expenses. How much rent should you expect?
- Before tenants move in, you'll need to buy fire insurance that covers the structure and contents of the rental property. You won't need more liability coverage, but you'll need to extend your current homeowners liability insurance
- The monthly rent check probably won't cover your expenses if you bought in a hot market with a minimal down payment during the recent run-up in prices. If the numbers don't add up, you'll have to decide whether to take the hit a little each month or all at once by accepting a reduced price for your home. To keep your options open, simultaneously try to sell and rent your home.
- Unless you want to become a landlord, hire a property manager. For a fee of 6% to 12% of the rent, a property manager will find and screen a tenant, negotiate the lease, collect the security deposit, take the tenant's 2 a.m. distress calls and ensure that you adhere to a raft of landlord-tenant laws.
You may be able to find a property manager through your real estate agent, or search for a local member of the National Association of Residential Property Managers.
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