How-to Monday: Deciding whether to sell or rent
Photo credit: Ross D. Franklin/Associated Press
A Wonk reader wonders whether it makes more sense to sell your house or rent it if you have to move -- and no doubt she's not the only one pondering this question. I asked real estate agent Dahlia Kaminsky because she works with city rehabbers, who have been pressed to consider alternatives to the fix-and-sell business plan that worked so well during the boom.
"A lot of people have their homes listed for sale and rent simultaneously," said Kaminsky, with City Life Realty in Hampden. "It's not an option for everyone, but for people who have the luxury, I would say, of being able to have options open to them, they are indeed renting or selling -- whichever comes first."
Things to consider, in Kaminsky's opinion:
--How much is your mortgage payment? If you bought your home in the last few years and didn't make a big down payment, for instance, it might be tough to get enough in rent to cover your costs. On the other hand, if you've owned for years and just want to wait out the housing slump, you could make money on the deal.
--On a related note: How much is the going rate to rent homes similar to yours? You can ask a Realtor or search websites that list rentals. (See this entry for some ideas.) If you're doing your own research, plan on spending more than a few minutes on it. Last week I checked out Baltimore's Pigtown -- or Washington Village, depending on which name you prefer for the neighborhood near the stadiums -- and found a wide range of asking prices for rents on Craigslist. A "2 BR 2 Full Bath BEAUTIFUL Rehab w/ Parkg, granite, deck, wd flrs" was listed for $1,235 a month, but there was a three-bedroom for $999 ... and another three-bedroom for $2,700.
--Will you manage the property yourself or hire someone to do it for you? Either way, count on extra expenses. And do your homework whether you're vetting tenants or property managers, Kaminsky said. A friend of hers went with a property manager and discovered later, when she was trying to sell, that the tenant had not moved out as agreed and had cats despite her no-pets rule.
--Is your house lead-safe? In Maryland, you need to pass a lead paint inspection to rent out a property if it was built before 1950.
--Can you find a rent-to-own tenant? A tenant who intends to buy down the road is more likely to "treat it with the love and care that a homeowner would," Kaminsky said.
She thinks it could make sense to rent for a small loss if you're convinced it's better to hold off on a sale. Just keep in mind that your costs probably won't be limited to the mortgage, insurance and property taxes. And you can't count on having a tenant -- a paying one, at least -- every month, either. (One of the landlords I talked to earlier this year for a story about investors going into foreclosure spent months trying to evict a non-paying tenant.)
Rental property requires your time, too. Kaminsky's parents have rental properties so she knows that firsthand: "I remember as a child, it was a lot of work day in and day out."
But now they're financing their retirement with the money. Kaminsky said some folks who decide to rent out their homes temporarily might find they like doing it. "It's a great time to pick up investment properties," she said.
Next week, if all goes as planned: How to buy a new home if you've chosen to rent out your current one rather than sell it.
Have any tips or thoughts about renting vs. selling? Have another question you'd like to see addressed? Comment here or drop me a line.
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