If your home won’t sell and you’re considering renting, you’re not alone. Plenty of people switch from homeowner to landlord when unexpected circumstances arise.
Peggy Abkemeier from Rent.com told Time, “We’re finding that a lot of people have houses that they would have sold and now need to rent. The demand is there. One out of every three renters who come to our site is interested in this new inventory.”
When your property won’t sell, renting it out sounds like a profitable alternative; a vacant home won’t bring in revenue. Although, renting your home will make you a landlord, and being a landlord isn’t easy.
Before turning yourself into a landlord, you need to know what responsibilities you’re looking at. Consider the following information before making a decision.
1. Real estate “seasons” apply to selling and renting your home
Zillow published a study in 2016 that concluded spring is the best time to sell a house. If you’ve been attempting to sell your home out of season, don’t expect it to automatically rent. The same seasonal rules apply to selling and renting your home.
People don’t generally move during fall and winter, although there are exceptions. During the holiday season, people are busy and money is tight. If you’re renting between December and February, be prepared to reduce the rent slightly below market value to ensure your place gets rented out.
2. Renting for emotional reasons is risky
Renting home because you didn’t get your asking price is an emotional decision that can hurt you. Becoming a landlord isn’t a quick fix to ease the burden of perceived loss; it’s a long-term commitment that takes time and money to sustain.
Renting your home because it sounds better than taking a loss on your sale price will cost you more money, time, and energy if you’re not careful. Being a landlord in Katy, Texas isn’t a hands-off job, unless you’ve hired a property management company.
3. Consider feedback from your prospective buyers
The weather isn’t the only reason homes don’t sell. Other factors like price, condition, and neighborhood can be a large part of the equation. Additional factors specific to why your home isn’t selling may not be obvious to you, but your prospects will tell you if you listen closely.
There are many things buyers hate. What objections did your prospective buyers express? Take note of everything they’ve said, even if you disagree. The reasons your home didn’t sell might also be obstacles to renting it.
4. Crunch your numbers diligently
If your mortgage payment is $1,700 per month, but you can only rent your home for $1,500 per month, renting it out doesn’t make sense. Selling at a loss, in this case, is your best option.
5. Include details on showings in the lease
If your ultimate goal is to sell your house, when you rent it out, detail how and when showings will take place in the lease. Getting the tenant to agree to showing terms ahead of time will encourage them to be cooperative.
6. Being a landlord costs time and money
The cost of being a landlord is extensive and shouldn’t be overlooked. Selling your home at a loss might be a better option, especially when you don’t have the time (or the desire) to manage tenants.
Some of the costs you’ll encounter as a landlord are:
- Vacancies. Expect a vacancy rate of 5% per year. This significantly reduces your gross rental income by the same rate per year. Keep this in mind when projecting profits and crunching numbers.
- Ongoing maintenance. Every home requires ongoing repairs and maintenance. When you lived in the unit, you may have been okay with a broken water heater and a leaky faucet. Your tenant won’t be.In addition to large repairs, your tenant will call you for repairs that are so small, you won’t believe they noticed. Like the pulley for the blinds being slightly off balance, or a tiny hole in the weather stripping on a window. Be ready to get calls and emails often, and pay 10% of gross rent for repairs.
- Property taxes. Have you noticed property taxes seem to rise but never decrease? There’s no way around paying steadily increasing property taxes as long as you own the home.
- Evictions. At some point, you might need to evict a tenant for not paying rent or violating the lease. The prospect of evicting a tenant is intimidating when you realize how much the law favors the tenant.For instance, if your property is vacant and someone decides to squat, you can’t kick them out for trespassing; they have renter’s rights in the eyes of the law. You’ll need to go through a formal (and costly) eviction process to get them off your property. This process can take several months.The same goes for a renter who stopped paying you rent. There’s a protocol to follow before you can even file an eviction, and if you make a mistake, you’ll have to start over (and you might get sued).
- High demand for your time. Between finding and screening tenants, repairs and maintenance, collecting rent, staying up-to-date with laws, and fielding calls from existing tenants, you’re going to be exhausted.If you don’t have a reserve of energy strapped to your back, you’ll get tired quickly. Money isn’t everything. If you’re not okay with being on call 24/7 for your tenant, you don’t want to be a landlord.
- Smart landlords hire a property management company
Being a landlord involves more than collecting rent and calling in repairs. It’s an unrehearsed dance between you and the tenant. When being a landlord isn’t your full-time job or passion, hiring a Houston property management company to take care of your tenants is the smartest solution.
Let Green Residential help
At Green Residential, we’ve got decades of professional experience in property management. From the ground up, we handle the time-consuming, energy-draining tasks that property investors don’t have time for.
We search for tenants and screen them to the highest standards. We also collect rent and handle repairs and maintenance through our existing relationships with a network of skilled professionals.
If you’ve decided to rent your home and don’t want the burden of being a landlord, contact us today for a free analysis. Find out how we can help you generate hassle-free income from your investment.