You may be wondering what would be best for you – to place your house for sale on the retail market, or to hold onto it as a rental. Here are some things to consider:
Advantages of renting out your house:
1. The property will provide income over time and for your retirement.
2. In a depressed housing economy, you may be forced to sell at a loss.
3. Less people are able to qualify for a home loan because borrowing requirements have tightened meaning, even if someone wants to buy your home, they may not be able to do so.
4. The number of people renting homes is increasing.
1. Dealing with tenants
2. Legal issues
I always recommend holding onto properties when possible rather than selling. If you hold your house as a rental, it should cashflow every month (bring in more with rent than what it costs for your mortgage, taxes and insurance). Nevertheless, it will cost you to keep it. Vacancies, damage, and upkeep will eventually come into the picture.
If you decide to keep your home and rent it out, the next question is – will you manage it yourself or will you have a management company take over the day to day issues? Your rental should be handled by you as a business, even if you have only one property. If well managed, it will prosper. If poorly managed, it will fail.
If you plan to hire a real estate or property management company to manage your rental home, consider:
1. Most management companies won’t attach the same importance to selecting good tenants and maintaining the property that you do. If you don’t live nearby or don’t want to manage for yourself, you need a good company with a good reputation to manage it for you.
2. Management fees will take part of your profits. In many cases, management and leasing fees can make the difference between positive cash flow (money left over after all expenses) and negative cash flow. Be sure you know your true numbers going into the decision. The management company you hire should be able to go over your numbers with you to give you a realistic idea of your costs and potential income.
If you can’t sell your home for what you need to pay off your debt, consider renting it out until you can make a profit on it in the future.
It is very possible to become wealthy over time by owning rental properties. There are plenty of horror stories from people who have done it wrong or let one bad experience take them out of the game. If you’re thinking about renting, don’t just listen to your uncle’s brother’s cousin who had a tenant poke holes in the wall. Talk to those of us who love the business and have committed to it for the long term.
Let me know if you have questions about renting out your home. Renting your property may not only prevent a financial loss when you sell, but may provide a way to save for your retirement as well!