In today’s real estate market many home sellers who must move are facing some tough choices. They can take a lower price for their property in the hope that it will sell sooner than later, they can wait in the hope that the market will improve or they can rent.
For sellers who do not want to enter the world of landlordship it is best to shop around for a competent licensed real estate agent to handle the renting and maintenance of the property. It will cost more, but the best part of the deal may be transferring landlord headaches to someone else. On the other hand, becoming a landlord can be a rewarding experience if there are good tenants and a market that is improving. In an ideal world, the rent covers the owner’s mortgage cost, repairs and maintenance and allows the owner to hold onto the property while it appreciates in value.
One of the first considerations in deciding whether to rent one’s property, assuming that the owner can afford to do so, is to think about how much knowledge the owner has about being a landlord. Many owners have never had experience with renting real estate except as tenants. That perspective is only one side of the landlord-tenant relationship, and it is a totally different perspective. Renting real estate as a tenant involves finding suitable property, contacting the landlord or owner, signing a lease and moving in. For the owner, it can be a bit more complicated. The most important part of being a landlord is renting to the right tenant. Thus, marketing the property and screening prospective tenants should be a high priority.
Properly marketing your home involves more than just running an ad in the local newspaper and signing an agreement with the first person that shows up. There as several ascending levels of marketing.
The first step is to make your neighbors aware that you will be moving and intend to rent your house. Your neighbors have a vested interest in having a good tenant live in your house because the care and maintenance of your property affects their property. They are also somewhat familiar with your property and able to describe it and the neighborhood to someone that they would want was a new neighbor.
Next, tell your co-workers and your friends about your house. They also will be careful to recommend persons who would be good tenants because of their relationship with you.
By now it is time to market the house to the world. Placing a sign in the front yard is the first step. Renters tend to drive around to neighborhoods that they are considering. Next, in today’s Internet world it is useful to consider taking photos of your house and either making a website or posting the information on one of the social media sites. Ideally, your house should be empty. All that business of staging a house is great for sales, but not for rentals in my opinion
Once your house is ready for the open market consider having showings and an open house on just a few days. Advertise that during that time you will be taking applications. At the end of the time period, review and evaluate the applications and pick the tenants that you want living in your house. Remember that even though there are some exemptions to fair housing laws you should not discriminate against any protected class of person. Rental agreements are available at the local office supply store, but it’s better to have your own lawyer look it over. You should also become familiar with state and local landlord/tenant laws.
Having said all the above it is now time for me to reveal a personal experience about marketing a home as rental property.
When my wife and I decided to buy another home several years ago the market was in a downturn. Fortunately, we were able to obtain financing on the new home without needing to sell our existing home. We decided to become landlords, and wait for an improving market to sell. We advertised the property for rent, stating in the ads that it would be available for inspection on a certain day. My wife agreed to stay at the house all day and show it to prospective renters. I emphasized that she should take applications and show the property. We would then evaluate prospective tenants and decide whom to rent to.
At the end of the day I returned home and asked, “Did anyone come by and look at the house?”
“Yes,” she replied. “I rented it already.”
I inwardly began fuming. What about our plan to take applications? Did not she hear my instruction about not renting to the first person that looked at the property?
“You did what?” I asked incredulously.
“Here is the signed rental agreement,” she said, handing me the document. “And here is the check for the security deposit plus six months rent in advance. Our new tenants are two medical students who plan to live here for two years. They prefer peace and quiet so they can study, and they said that when they leave that they can recommend new tenants who are students to us.”
Now dumbstruck, I said, “What took you so long to rent this place?”
Sometimes common sense overrides detailed real estate advice.
Phil Hardwick is coordinator of capacity development at the John C. Stennis Institute of Government. Contact Hardwick at firstname.lastname@example.org.