"It's not uncommon for people decide to keep their current home and rent it out, when they decide to buy a new home. But is that the right decision for you? There are many factors to consider first. Here are 10 things to think about before you take the plunge into becoming a landlord."
DC Metro Realty Team - Denise Buck & Ed Johnson
Recent studies have shown that 39% of buyers prefer to rent out their last residence rather than sell it when purchasing their next home.
The study cites that many homeowners were able to refinance and “locked in a very low mortgage rate in recent years. That low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month, so they are going for it.”
This logic makes sense in some cases. We 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. Are you ready to be a landlord?
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.
