AGENTS: Did you know you can share a personalized version of this post? Learn more!

Should I Rent My House If I Can’t Sell It?

Should I Rent My House If I Can’t Sell It?

For rent real estate sign in front of house

There has been a lot written about how buying a home is less expensive than renting one in most parts of the country. Rents are skyrocketing and homes are still at great prices. These two situations are also causing some sellers to consider renting their home instead of selling it. After all, a homeowner can get great rental income now and perhaps wait until house values increase even further before selling.

This logic makes sense in some cases. We at KCM believe strongly that residential real estate is a great investment right now. However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for.

Before renting your home, you should answer the following questions to make sure this is the right course of action for you and your family.

10 Questions to Ask BEFORE Renting Your Home

1.) How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations? (This happens most often during holiday season and back-to-school time when families with children have extra expenses).

2.) Because of the economy, many homeowners can no longer make their mortgage payment. What percent of tenants do you think can no longer afford to pay their rent?

3.) Have you interviewed a few experienced eviction attorneys in case a challenge does arise?

4.) Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner occupied home?

5.) Will you allow pets? Cats? Dogs? How big a dog?

6.) How will you actually collect the rent? By mail? In person?

7.) Repairs are part of being a landlord. Who will take tenant calls when necessary repairs arise?

8.) Do you have a list of craftspeople readily available to handle these repairs?

9.) How often will you do a physical inspection of the property?

10.) Will you alert your current neighbors that you are renting the house?

Bottom Line

Again, renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided to rent the house because you want to be an investor, not because you are hoping to get a few extra dollars by postponing a sale.

We believe every family should feel confident when buying & selling a home. KCM helps real estate professionals reach these families & enables the agent to simply & effectively explain a complex housing market. Take a 14-Day Free Trial of our monthly membership to see how we can help you!

9 replies
  1. Ruthmarie
    Ruthmarie says:

    Being a landlord is difficult. My mother was a landlord and I said “never.” But some of this seems contrived to “scare” potential sellers into locking in losses rather than do what is truly in their best interests. Three of your 10 points are essentially on the same issue and then another two points were on the same issue and #10 was a throwaway. WE make more money if they sell, but that might not be what is best for the seller. I have a home that I’m struggling to stay in. Bottom line, too much of my financial security is at stake to sell at a severe loss. I will probably have to rent it. But I notice other agents trying to get me to sell in order to pry loose inventory. Not happening if its in my best interests to do otherwise.

    Reply
    • Steve Harney
      Steve Harney says:

      Hi Ruthmarie,

      We would never suggest any real estate agent not work in the best interest of their seller. We just believe that all buyers and sellers should make informed decisions. With the rental market as strong as it is, it may seem rather easy for a seller to rent their home. We just want them to consider all aspects before making a decision.

      As far as ‘scare’ tatics, fear is created by a lack of knowledge not too much knowledge. This blog is dedicated to remove any fear by discussing all aspects of a decision.

      P.S. Which of our ten questions do you think a homeowner should not answer before deciding to rent their home?

      Reply
  2. Ann
    Ann says:

    Assuming there is a mortgage on the property, my first question would be to myself… “Do I have enough reserve to make this payment (along with my other obligations) if my tenant defaults?” It can take months to evict and find another suitable tenant. Which is better in the long run….take a financial hit by selling at a loss or risk losing everything because you didn’t have enough money to carry it without the rental income?

    Reply
  3. Cynthia Landis
    Cynthia Landis says:

    You forgot another important facet regarding renting: will the tenant permit showing of the home 60 to 90 days prior to the expiration of their lease? Will they be cooperative when it comes to showings from the timing of appointments to the staging of the house? How will a tenant’s furnishings look in the home? Even if the market appreciates, a bad tenant can ruin a small financial gain if they are uncooperative or worse, slovenly.

    Reply
  4. Graig Griffin, SIOR
    Graig Griffin, SIOR says:

    CAUTION: From a purely practical standpoint, this is a great checklist. However it misses two major points:

    – Is renting able to get a rate of return (including a factoring of risk) at least similar to other investment vehicles? AND

    – Are the income tax ramifications going to work in the owner’s favor?

    Without knowing these elements, even a home that seems like a great rental can easily be a total loser when costs of ownership (taxes and insurance), costs of renting (upkeep, capital repairs, accounting, legal, additional insurance), linear cost recovery ramifications (depreciation), and owner’s personal time (at some realistic cost per hour) are factored in.

    Other elements worthy of consideration are:

    – Reduced credit score/borrowing ability if the property has mortgage(s)

    – Market trajectory (prices increasing, static, or decreasing)

    – Home factors such as functional and aesthetic obsolescence

    – Occupancy rights of tenants (what if they NEED to sell later but have a lease in place?)

    Owners need to know that even though it’s a home, the instant you convert it to a rental – it’s investment (commercial) real estate and the skill set to determine worthiness and REAL cost income is vastly different. Agents need to remember that too, and make sure they are properly trained before ever giving advice on converting a home to a rental – the liability is massive.

    Reply
  5. Caleb
    Caleb says:

    If you are unable to sell your home renting it out could be a viable option. There is a process that you need to go through and talking with a professional is definitely where you need to start.

    Reply

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *