Real Estate Advice: Rent It Out or Leave It Vacant?
By Rob Massey, RISMedia Guest Columnist
Over the years, I have taken over the management of many houses that had been on the market for sale but, because of a weak sales market, remained unsold and vacant. In nearly all cases-from a cash flow standpoint-renting out a house in this situation is preferable to leaving it vacant. But many factors should be considered first. Coming from the seller, it always sounds so simple: "I can't sell my house, so at least I can get it rented and slow the loss of dollars paid to my mortgage company and paid for taxes and insurance."
Well, not so fast. Was the house properly prepared for sale? If so, will those preparations be enough for renting it out? When ready to put it back on the market, will the seller have to do anything to the house to make it salable? If so, the damage deposit will cover those costs, correct?
Renting out a house that has been for sale for an extended period due to weak market conditions is certainly an option that should be considered. However, there are additional factors that may affect whether or not renting is the best option for your property:
1) Sellers should be aware that many rental market cycles are similar to sale market cycles. In some parts of the country, sales slow down during the fall and continue to decrease until after the first of the year. This is also true with the rental market in many of these same areas. So to assume that a home will be easy to rent once the sale-market peak has passed is not usually true.
2) Get prepared. Getting a home ready for the rental market is a critical part of renting. If the home was not properly prepared for the sale market, then it will likely not be ready for the rental market either. In fact, I believe that with renting, preparation is even more important. It is vital not to overlook this very significant factor in renting out a house.
3) Sellers should be conscious of the fact that if the house is in great shape with new carpet and fresh paint, it will need some of the same tasks when it's time to put the home back on the market. Hopefully, the carpet won't need to be replaced, but it will need to be cleaned. The walls will need to have a fresh coat of paint, or at least a touch-up, and the cleanliness of the house will have to be addressed. So, in many cases, the house has to be prepared for the market twice.
4) People looking to rent don't care about the cost of the mortgage, taxes, insurance, or management fees. They will be willing to pay the market rent and no more. If a seller must cover all of these expenses in order to rent, he or she will likely be better off reducing the sale price further and cutting his or her losses with a lower sale price. There are no guarantees when it comes to renting. The tenant may have some bad luck and not be able to afford the rent, and many components of your home are always at risk for a malfunction. Steady income from a single-family rental home is certainly no guarantee.
5) Anything that is provided in a rental home must work. Sellers should realize that just because they opted not to repair and use a component of the home, it doesn't mean that they don't need to fix or replace that item for a tenant. All appliances in the home at the time of renting should be operational. Renting out a house that won't sell is certainly a great option for some situations. However, it does not apply to every case. Smart agents need to inform their sellers to carefully weigh their options prior to committing to renting out a house that they really want to sell.
Rob Massey is the founder of RentalHouses.com and vice president of industry development for Rentals.com. Contact him at email@example.com.