There are several times when it makes sense for home sellers to do a pre-sale rental. One is when they must move, but want to delay a sale for a better market or until they can do major upgrades.
But real estate experts say many owners are unhappy at the thought of renting out their house, however temporarily.
“Some people feel emotionally sad about someone else living in the family home. They’re also afraid the house will be damaged by tenants,” says David Roberson, author of “How to Legally Rent Out Your House: A Practical Guide to Managing Rental Property Risks.”
Roberson, a real estate attorney, says many hazards of renting can be minimized through careful screening of tenants. He and his wife own 22 rental properties, and they limit rentals to those who earn a gross income of at least three times the monthly rent. They also insist on high credit scores.
“We want a FICO score of at least 700 -- unless the person has been through a recent divorce that caused their credit to take a temporary hit,” he says.
The couple also make sure their properties are videotaped to record their condition prior to rental. That way they can justify any charges for damages when the tenants vacate.
To avert complications, he says it’s wise to hire a professional property manager.
“Every time I hear of a landlord-tenant nightmare, it’s when the owners are managing the rental themselves -- without a pro involved,” he says.
Mark Nash, a longtime real estate broker and author of “1001 Tips for Buying and Selling a Home,” says it’s an especially good idea for novice landlords to opt for professional management.
“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’s owned rental units for more than two decades.
Here are a few pointers:
-- Check the strength of your local rental market.
You may think it’s smart to rent out your home until you’re ready to sell. But this may not be the case if the supply of rental properties in your area outstrips demand, depressing the rental income landlords can collect.
As Nash notes, 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.
Print or online advertising can also give you clues. Survey the ads to gauge availability and price for your type of property.
“You might even want to run a test ad to see what response you get,” Nash says.
-- Crunch the numbers on the financial impact of renting out your place.
Most owners considering a rental want to make sure that their rental income would more than cover their monthly mortgage payments, along with 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 upkeep expenses.
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.
-- Attempt to damage-proof your home before tenants move in.
When they sell their home, most people cut the emotional cord and move on psychologically, Nash says. 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,” he says.
There are no absolute 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 from a home center store.
-- Plan to empty your home of renters before you seek to sell.
As real estate agents will underscore, 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 cause trouble, 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 on the market. With the tenants gone, you can ensure that any remaining cosmetic or repair issues will be quickly resolved.
“That final interior painting and carpet cleaning can make a world of difference to your bottom line,” Nash says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)