One of the most often asked questions by those looking to move or to purchase a new home has to do with the fate of their current home. “Do you think we should rent or sell our home?” There is never a right answer to this question as it often depends on the individual themselves and how much they are willing to take on. Selling your home can be a big process, but being a renter is often an even bigger process (albeit more rewarding in the long run). So, if you are on the fence about whether you want to sell or rent your home, don’t worry, you are not alone. A recent study has concluded that 39% of buyers prefer to rent out their last residence rather than sell it when purchasing their next home.
The study cites that many homeowners were able to refinance and “locked in a very low mortgage rate in recent years. That low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month… so they are going for it.”
Now, renting is sound logic and makes the most sense in many cases as residential real estate is a great investment right now. However, if you have no desire to actually become an educated investor or a landlord, then you may be headed for more trouble than you were looking for. Are you really ready to be a landlord? Before you decide whether you should rent or sell, ask yourself these 10 questions:
- How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations?
- What percentage of tenants do you think cannot afford to pay their rent?
- Have you ever interviewed experienced eviction attorneys in case a challenge does arise?
- Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner occupied home?
- Will you allow pets?
- How will you actually collect the rent?
- Repairs are part of being a landlord. Who will take tenant calls when necessary repairs come up?
- Do you have a list of craftspeople readily available to handle these repairs?
- How often will you do a physical inspection of the property?
- Will you alert your current neighbors that you are renting the house?
You see, much like deciding to sell your house without the expertise and knowledge of a seasoned real estate agent, renting your home has a lot of pitfalls. But, even with all of the pitfalls and potential hang-ups, renting out residential real estate is historically a great investment. So, you must be absolutely sure you are ready to take on the challenges of being a landlord and all that it entails. Just make sure that you have decided to rent your house because you want to be an investor, not because you are hoping to get a few extra dollars by postponing a sale.