Before You Rent out Your Home - Make Sure You Can Afford It!

By
Education & Training with The Get Off Your A$$ Academy

This is just a quick "advice" post as I have come in contact with many folks this week who could not afford their mortgage, or moved out of their house and signed a long term lease with a tenant for less than what they pay on their mortgage.

For example:

Your mortgage is $2000 per month....you had to move because of your job, or because you wanted to downsize to an apartment, and then you rent out your home for $1400, leaving a monthly deficit of $600.

If you are going to do this, PLEASE do a careful budgeting session as a family to make sure you can comfortably afford this shortfall. If this $600 is going to make you struggle, it may be better to discuss a loan modification or even do a short sale if your home is worth less than what you owe. I have seen some people get really stuck here, when they finally realize they want to do a short sale, and they now have a tenant locked into a 12 month lease and the tenant will not cooperate with showings, nor moving out early. Just make sure you can afford to still pay the loan. If you can't, lets see if there is a better option for you than renting to help you.

If you have already rented it out, and are in financial trouble because of it, CALL US. I can share the options with you, and we have a strong team of professionals incuding lawyers, financial advisors and accountants, who can help you execute whatever option you deem is best for your situation.

Sean Carroll - Realtor, Associate

www.TeamCarrollNJ.com

www.HomeOwnerHelpSite.com

 

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distressed properties
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Rainer
42,917
Brian Griffis
Realty Choice - Springfield, MO

Very good post.  I see many people (especially builders) rent out their houses instead of taking a loss.  You are totally correct, if they add up the numbers, many times they would be better just to take the loss up front instead of dragging it out forever. One also has to make sure renters are not going to tear up ones house.  That can cost you a lot more than the loss as well.

Jan 22, 2009 08:21 AM #1
Rainer
119,762
Sean Carroll
The Get Off Your A$$ Academy - Manhattan, NY
Real Estate Speaker and "Expert" Coach

Brian - great additional point about the renters tearing up the house. Thanks for stopping by!

Jan 22, 2009 08:37 AM #2
Rainmaker
338,314
Paul Slaybaugh
Realty Executives - Scottsdale, AZ
Scottsdale, AZ Real Estate

Prospective landlords also forget about the unforeseen expenses when opting to lease out a home to shift the carrying cost burden in a difficult market.  If they are really hand to mouth, how are they going to take care of the water heater that goes out on the tenant, or god forbid, the A/C.  It would be wise to consult with a professional about all of the options available, including placing a home warranty on the property, etc.

Jan 22, 2009 02:52 PM #3
Rainer
119,762
Sean Carroll
The Get Off Your A$$ Academy - Manhattan, NY
Real Estate Speaker and "Expert" Coach

Paul - very good advice. I have gotten caught in that trap in the past myself. It's not just the monthly expenses that need to be considered, it's all the "oh by the way" repairs that pop up with home ownership

Jan 23, 2009 12:25 AM #4
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Rainer
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Sean Carroll

Real Estate Speaker and "Expert" Coach
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