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Since I Do Not Want to Take a Loss, Should I Rent Out My Home?

Real Estate Agent with Century 21 HomeStar Ohio DRE File# 245997

October 20, 2011 05:50 AM

As a Realtor I get this question often: "Since I do not want to take a loss, should I rent out my Home?"

In my reply I point out that the seller already may have a loss on her home, whether she "takes it' or not.

When values go down does it really matter if you have converted the asset to cash? Your net worth has been reduced whether or not you count that asset in the form of cash or in the form of house.

Renting out your home is not always a good idea. First you must find a suitable tenant -- which could take a while, with expenses mounting but no money coming in. There will be a delay while you yourself move out and get the place ready to rent

Once you find a tenant you will still have to pay your mortgage, taxes and insurance and maintenance and a 6% - 10% management fee. It is possible that the rent will not even come close to covering all those costs, so in effect you are subsidizing your tenant's living expenses.

Then there is the possibility that your tenant will stop paying the rent and you must incur legal expenses and delays in removing that tenant.

After the tenant moves out you will have still more renovation expenses to bring the house back to marketable condition, and there is no guarantee that prices will have stabilized by that time -- they might be even lower than they are now.

I believe that rental property is often a good investment, but your own home is not very likely to be one of those. So my advice is usually -- but not always, "No, you should not rent it out".

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Wallace S. Gibson, CPM

Gibson Management Group, Ltd. - Charlottesville, VA

LandlordWhisperer

Well-maintained homes, in good locations, near good schools AND employment opportunities are renting FAST. Explaining the TAX JOYS of owning rental property needs to be a discussion listing agents have with their clients about to vacate and leave their area.

Oct 20, 2011 05:52 AM

Thomas McCombs

Century 21 HomeStar - Akron, OH

Wallace: You are absolutely correct.

My thoughts centered on the economic advantage to the seller, which in the case of higher priced homes is not often very great. I have found that the tax joys you refer to are sometimes less than expected. That is another reason that the advice of a competant professional should be obtained.

Oct 20, 2011 05:59 AM

Michelle Francis

Tim Francis Realty LLC - Atlanta, GA

Realtor, Buckhead Atlanta Homes for Sale & Lease

Thomas,

It depends. We lease higher end homes in Atlanta. Our demand is extremely high, our rents are high, our vacancies are very low and our average credit score is about 785 with minimal deductions for damages at the end of leases. The answer to this depends on your market and demand as well as what works well for the owner.

I have a few owners that are happy as clams as we continue to lease out their homes... without literally ANY vacancies and they feel like their ROI is higher than what they could make if they sold the homes. They are thrilled. It's NOT for everyone, but it might be fore more folks that the typical sales agent realizes. However, of course, it's hard for a sales agent to suggest it, as they don't make as much money.

All the best, Michelle

Oct 21, 2011 03:24 AM

Michelle: How much rent would you expect to get for, as an example, a home worth $300,000 in your market? $200,000?

How do you calculate that ROI?

These are the kinds of statistics that provide answers to this common question.

Thank you for contributing!

Oct 21, 2011 03:39 AM

Maureen McCabe

HER Realtors - Columbus, OH

Columbus Ohio Real Estate

.... good post! Why did I think this one was a new post? I guess I must have come from a comment you made more recently.... What would a $200,000 or $300,000 house in Akron rent for? I have no idea what one would rent for in Columbus, I probably should be paying more attention.

Dec 17, 2011 03:32 AM

I know of one Akron area house valued at $450,000 (by the owner) that rented for $1800/mo.

I believe that it would be more profitable to get that same $1800/mo by renting out three $40,000 houses @ $600 each.

The total value of those three houses = $120,000.

It might be possible to get $1200 for a $200,000 house.

If anyone else out there has some statistics to provide from their own markets, I would be glad to see them.

Dec 18, 2011 09:35 AM

Since I Do Not Want to Take a Loss, Should I Rent Out My Home?

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