A couple of law school professors in their 60s were honored with the chance to work in Switzerland for a human-rights organization. With their kids already in college, they accepted the invitation. But one question loomed: Should they rent or sell the stately Georgian house they’d inhabited for a decade?
Assuming they would one day return to their leafy suburban neighborhood, they opted to rent out the property to a single man with three teenage sons. Unfortunately, the rental worked out poorly. The couple chose to remain in Europe indefinitely and sell the house. But the tenants had so damaged the property that the owners had to embark on a costly renovation before putting it on the market.
Dorcas Helfant, a past president of the National Association of Realtors, doesn’t know the homeowners in this true story. But she says they could have foreseen the potential for expensive issues created by the three-year rental involving the single man’s family.
“The horror story happens for some owners who fail to realize that renting could mean your light-colored walls will get banged up and your carpets die. Maybe your hot-water heater and air conditioner will go out as well. Also, don’t forget the potential for awful black mold in your bathrooms,” says Helfant, the co-owner of six Coldwell Banker realty firms.
But the decision to rent rather than sell isn’t always a bad one. As Helfant notes, there can be advantages to leasing your home on a temporary basis.
One category of owners who might benefit from a short-term rental are soon-to-retire people who want to try out a new location for possible relocation. Perhaps they can afford to take a temporary rental in the new area only if they can collect rental income on the place they already own.
“Perhaps you always imagined retiring to a sunny area several states away. Or you’re considering a community close to your grown children and grandkids,” Helfant says.
This temporary rent-rent option could also work well for owners whose plans are uncertain due to a recent divorce or death in the family. Or you might pursue this course because you’ve taken a new job in another city and aren’t sure the career change will work out.
“In all these situations, you keep your options open as to when and where you’ll settle down,” says Mark Nash, a real estate analyst and author of “1001 Tips for Buying and Selling a Home.”
But Nash urges owners to exercise caution before deciding to rent out any home. Here are a few pointers:
-- Collect information on the strength of your local rental market.
You may think it’s wise to rent your home for a limited period of time until your plans gel and you’re ready to sell. However, this may not be the case if the supply of rental properties in your area outstrips demand, depressing the rental income landlords can collect.
Most large realty firms have rental departments that can help you assess the relative strength of your local market. Agents who routinely list rentals on the Multiple Listing Service should be able to quickly estimate how much rental income you can expect to receive.
Real estate ads can also give you clues as to the state of supply in your area. Look for listings of property similar to yours.
-- Crunch the numbers on the financial implications of renting your home.
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 maintenance.
“Remember that if the bathroom plumbing develops problems and your tenants are going through meltdown about it, you’ll probably need to pay a plumber rather than fixing it yourself,” 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.
-- Assume you’ll need to empty your home of renters before you sell the place.
As real estate agents will attest, it can be tough to sell a home while tenants are living there.
To avoid this potential problem, Nash recommends you plan to have your property vacant for at least a month before putting it up for sale. With the tenants gone, you can ensure that any cosmetic or repair issues are resolved.
-- Look into professional management for your rental property.
Nash says it’s sensible to consider hiring professional managers 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.
“Being a landlord is like being a parent. You’re faced with demands you can’t push off onto someone else, unless you have a property manager,” says Nash, who owned several rental units for a period spanning 11 years.
-- Try to damage-proof your house before your tenants move in.
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 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.
“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 sell,” Nash says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)