Rental rates are rising ever higher, especially in popular metro areas where young adults wish to live. That’s tempting more boomers on the verge of retirement to postpone the sale of their home in favor of renting it out.
At CoreLogic, a think tank that tracks housing markets nationwide, principal economist Mary Boesel says rents are ascending most quickly for entry-level properties.
“Low rental supply coupled with ongoing demand is pushing up rents compared with a year ago,” Boesel says.
Mark Nash, a longtime real estate broker and analyst and author of “1001 Tips for Buying and Selling a Home,” says boomers who are uncertain where they’ll wish to settle after retirement are sometimes well advised to delay liquidating a family home. That way they could try out a new locale with a short-term rental of their own.
Another reason some boomers are postponing a home sale is that the real estate market -- always slower in winter -- looks more uncertain than usual for 2020.
Todd Teta, a senior official at Attom Data Solutions, says that despite low mortgage rates, the pace of home price increases could slow next year due to fears of a possible recession and political uncertainties.
But real estate specialists caution that converting your family home into a rental can bring unpredictable complications. Here are a few pointers:
-- Take into account all the expenses associated with a rental.
Most homeowners want to ensure they would make money on their rental. They want to be certain their rental income will more than cover their monthly mortgage payments, taking into account their property tax and insurance charges.
When assessing the financial impact of converting your place to a rental, even a temporary one, Nash says you should be sure to factor in the expense of home upkeep.
“Remember that if the bathroom plumbing develops problems, you’ll probably need to pay a plumber rather than fixing it yourself as you might have done when you lived in the house,” he says.
As Nash says, you’ll also want to consider the tax implications of a rental. To do so, he recommends you call or visit an accountant for advice.
-- Realize you’ll likely need to empty your place of tenants before you sell.
As real estate agents attest, it can be tough to sell a home while tenants are living there.
“As a rule, tenants don’t care if you sell. They might even become annoyed and block showings. Or they could deliberately leave the house like a pig pen -- with dirty dishes in the sink and unmade beds -- so you won’t be able to sell and they won’t have to move,” Nash says.
To avoid this potential problem, he recommends you plan to have the property vacated of tenants for at least a month before it goes up for sale and while the place is being shown. With the tenants gone, you can ensure that any cosmetic or repair issues are resolved.
“Among other things, you’ll probably want to do some interior painting and get your carpeting thoroughly cleaned,” Nash says.
-- Consider hiring a professional manager to handle your rental.
Perhaps you’ve decided it’s a smart choice to rent out your place for a year or so before selling it. Yet you don’t want all the headaches of dealing with landlord issues on a day-to-day basis.
In such cases, Nash says it’s sensible to consider hiring a professional manager to deal with tenants, sparing you the need for direct contact. You’ll still have to pay the repair bills, of course. But you won’t need to take those late-night calls from irate renters.
“You’re faced with demands you can’t push off onto someone else, unless you have a property manager,” says Nash, who’s long owned rental property.
-- Attempt to damage-proof your place before tenants move in.
When they sell their home, most people cut the emotional cord and move on psychologically. Not so when the owners are merely renting out the property.
“So long as they continue to own a place, most people are still territorial about it,” Nash says.
There are no guarantees your home won’t sustain serious damage while it’s rented. But Nash advises you to take several steps to minimize your risks. Repaint walls covered with flat latex paint with an easy-to-clean semi-gloss finish. Seal your hardwood floors with two or more coats of protective coating. And replace valuable light fixtures with inexpensive ones purchased at a home center store.
“Keep your eye on the ball. With a short-term rental, your goal is not to become a professional landlord. The idea is to keep your options open until the timing and circumstances are right for you to move back in or sell,” Nash says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)