Should you rent your house?
The simple answer? It depends…
That may surprise you coming from a property management company.
But it shouldn’t.
We manage property for homeowners who probably wish they didn’t own a rental house for various reasons.
We also manage property for homeowners who consider it one of the best decisions they’ve made.
Our goal with this post is not to sway you one way or the other, but to give you some helpful guidance so that you can make the best decision for YOU!
Of course if you do decide to rent your house we would love to help you get your house ready, find the best tenant and have great success as a landlord.
But if you’re on the fence and trying to figure everything out, then keep reading.
People consider renting their houses for a variety of reasons.
- They’re moving out of town for work and believe they’ll move back into their home after their assignment is finished
- They have another house they want to buy but can’t sell the one they’re living in so renting is an alternative they’re considering
- They see it as a possible long term investment strategy
- They believe it can provide some additional income
If one of these describes your thought process or situation, then this article is for you and we have some insight that will help you make the best decision.
So, should you rent your house?
Let’s think through some items you need to consider:
1. Is your move permanent or temporary?
Let’s suppose you are moving out of town for work but plan on coming back after a certain period of time and think you might want to move back into your house. This scenario happens more often than you imagine.
If I were moving my family to a different city (say Nashville…just because we love that city and my wife and I both graduated from Lipscomb University), I would strongly consider renting my current home for a few reasons.
- It’s the home where our kids grew up and would be perfect for us once we moved back to Birmingham
- I believe real estate in Nashville may be overpriced and wouldn’t want to get stuck in a house I can’t sell if the market were to correct itself within 24 months
- The commission I would pay to sell my house in Birmingham and then buy another one in 12 to 24 months might make it more expensive to sell than to rent it out.
The reasons could go on but I think you get the point.
So in this case…if you know you’re moving back into town, it makes perfect sense to rent your house for 12 to 24 months.
2. Do you need the profit on the sale of your house to put into a new house?
Suppose you have a house that you want to go ahead and buy but you can’t sell your house (we get this call quite often).
If you don’t need all the cash from the sale of your home then you might want to think about renting and taking an equity line of credit (HELOC) to fund the down payment on your new house. As long as your rent can cover your mortgage plus your equity line, it might make perfect sense. Over time you’ll be paying down that equity line with your tenant’s money!
So what are the alternatives?
If you feel like this is too risky of an option (you would not feel comfortable with a HELOC) you could continue to try and sell your house or decide not to move at all.
If you’re in a healthy market with a good sales of comparable houses but yours continues to sit, it possibly means you have either a pricing or a product problem.
- Is your house outdated? Product problem.
- Is your house up to date with the comparable houses that have sold in your area? Pricing problem.
In these cases it’s best to listen to the market and either decide to lower the price or improve the product. We have these same discussions with rental house owners who aren’t seeing a lot of traffic or applications come in for their house.
3. Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair?
If you can rent your house for enough to cover the mortgage, taxes and the occasional repair, it could make a lot of sense. We’ve seen owners use the rental income to build into their retirement either through cash-flow or the equity the rental income builds paying down their mortgage.
You likely won’t have to pay taxes on the income with deductions from the mortgage and any repairs through the year. And if you believe your house will increase in value over the time it’s going to be for rent…then when you end up selling your house, you will realize that appreciation in a lump sum. Not a bad idea, huh?
4. Can you handle tenants?
This wouldn’t be the case if you used a good professional property manager. A solid property manager in Birmingham will act as your agent for the life of the agreement and handle all communication and any maintenance issues that arise…especially the ones that happen in the middle of the night!
But if you decide to go it alone then this is a valid question to ask yourself.
Here are some considerations for you to think about:
- Can I effectively screen out a potentially problem tenant and find the best one for my house?
- Do I have the time to answer the phone/email and show the house to anyone who’s interested and wants to take a look inside. As a Birmingham property management company we know that we average 15 showings to get five applications to find that ONE great tenant…do you have the patience and discipline to stay the course?
- Do I have the ability to hire and manage quality maintenance personnel to take care of any calls that come in which require attention?
- Do I have the right leases and documentation to make sure I follow the appropriate state laws when dealing with tenants?
This is a good start.
Looking back over the list I would say that you should DEFINITELY rent your home if you answered in the following way:
Is your move permanent or temporary? My move is temporary
Do you need the profit on the sale of your house to put into a new house? No
Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? Yes
Can you handle tenants? Yes
If this is the case you shouldn’t hesitate. Do it and you’ll be glad you did. And should you need any help with the ‘how to’ involved in the management process, check out our ebook on the subject.
You should strongly CONSIDER renting your home if you answered the questions the following way…but you need a strong Birmingham Property Manager to navigate through the process:
Is your move permanent or temporary? My move is probably permanent
Do you need the profit on the sale of your house to put into a new house? I need it but would consider a HELOC…or I don’t need it
Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? Yes, but it will be just enough
Can you handle tenants? I don’t know because I’ve never rented a house
I’m going to insist that you DON’T rent your home if you answered this way:
Is your move permanent or temporary? My move is permanent
Do you need the profit on the sale of your house to put into a new house? Yes, I need the profit…I can’t get a loan
Can you rent your house for enough to cover your mortgage, taxes, and the occasional maintenance repair? No
Can you handle tenants? I don’t like dealing with inconveniences in my life!
There you have it…walk through this list and if you have any questions (like how much should your house rent for) don’t hesitate to give us a call if we can help.