5 tips be­fore you rent out your home

Daily Press - - Real Estate - By Ellen James Martin An­drews McMeel Syndication

A real es­tate agent cher­ishes the one-story ranch house she has owned and ba­bied for 14 years. To en­hance her place, she re­cently painted the en­tire in­te­rior. She also sanded and pol­ished her hard­wood floors and ex­panded the kitchen, mak­ing it light, bright and open to the din­ing area.

This agent can’t bear the thought of sell­ing her beloved sanc­tu­ary. But that sen­ti­ment is now com­pet­ing with her en­gage­ment to a man from an­other city where she plans to move, how­ever tem­po­rar­ily. So, to buy time be­fore mak­ing a fi­nal de­ci­sion, she’s placed the prop­erty on the rental market.

“She’s hold­ing her breath that a rental will work out with­out any se­ri­ous prob­lems, and so am I,” says El­iz­a­beth Wein­traub, a col­league and friend of the prop­erty owner.

Wein­traub, a real es­tate bro­ker who has sold homes since 1979, says the odds are good her friend will do well as a land­lady be­cause of her back­ground in the hous­ing field. But she said many home­own­ers who con­vert a residence to a rental prop­erty are more naive about what that en­tails.

For in­stance, Wein­traub tells the true story of a cou­ple of clients who had a ter­ri­ble ex­pe­ri­ence rent­ing out their house to a pair of doc­tors. When it came time to sell the place, the doc­tors were so an­gry at be­ing up­rooted that they poured cas­tor oil all over the white wall-to-wall car­pet. In re­cent years, many lo­cal gov­ern­ments have tight­ened reg­u­la­tions pro­tect­ing ten­ants. As Wein­traub says, long­time renters are typ­i­cally much more fa­mil­iar with these reg­u­la­tions than are first-time land­lords, which puts them at a dis­ad­van­tage if a dis­pute de­vel­ops.

Here are a few point­ers for home­own­ers con­sid­er­ing a tem­po­rary rental:

In­form your­self about your lo­cal rental market.

Sid Davis, a real es­tate bro­ker and au­thor of “A Sur­vival Guide to Sell­ing a Home,” says that be­fore de­cid­ing to con­vert your residence to a rental, you should make sure the num­bers work for you.

As he notes, most large realty firms have rental de­part­ments that can help you as­sess the rel­a­tive strength of your lo­cal market. Agents who list many rentals on the Mul­ti­ple List­ing Ser­vice can quickly es­ti­mate how much rental in­come your prop­erty could com­mand.

Ad­ver­tis­ing (on­line or in print) can also help, Davis says.

Sur­vey the ads to see how nu­mer­ous they are for your type of prop­erty (sin­gle fam­ily, town­house or condo/ apart­ment) and go­ing rents.

“You might even wish to run a test ad to check out your rental market. This is not un­eth­i­cal, so long as you don’t mis­lead any po­ten­tial ten­ants,” he says.

Con­sider pro­fes­sional man­age­ment.

Mark Nash, a long­time real es­tate bro­ker and au­thor of “1001 Tips for Buy­ing and Sell­ing a Home,” says it could be sen­si­ble to con­sider en­gag­ing a pro­fes­sional man­ager to over­see the prop­erty.

“Many peo­ple find it an­noy­ing to be a land­lord. It’s like be­ing a par­ent,” says Nash, who owned sev­eral rental units for a pe­riod span­ning 11 years.

He says the sole down­side of hir­ing a good rental man­ager — who is best found through per­sonal re­fer­rals — is that this ser­vice will cut into your rental in­come. That could pinch your bud­get if you’re op­er­at­ing with a nar­row profit mar­gin.

In­ves­ti­gate the fi­nan­cial im­pli­ca­tions of rent­ing.

Most land­lords want to be sure they’d have a pos­i­tive cash flow from their rental, mean­ing they’ll bring in more than enough in­come to cover their mort­gage pay­ments af­ter taking into ac­count prop­erty taxes and in­sur­ance costs.

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 home main­te­nance ex­penses.

“Up­keep can be a big item,” he says.

You’ll also want to con­sider the tax im­pli­ca­tions of rent­ing out your home. To do so, Nash rec­om­mends you call an ac­coun­tant for ad­vice.

Re­al­ize you’ll likely need to re­move ten­ants be­fore you sell.

Do you in­tend to rent out your place tem­po­rar­ily with the ex­pec­ta­tion that you’ll prob­a­bly sell in the fu­ture? If so, Davis says you should be aware that it can be tricky try­ing to sell a home when it’s oc­cu­pied by ten­ants.

To avoid this prob­lem, Davis rec­om­mends you plan to have your prop­erty va­cated for at least a month be­fore it hits the market. That way you’ll have time to paint, clean and do re­pairs be­fore it’s avail­able for show­ings.

Make sure you have the right tem­per­a­ment.

Once a home is sold, most peo­ple close the door and move on emo­tion­ally. Not so when you’re rent­ing out a prop­erty, Davis says.

“Psy­cho­log­i­cally as well as fi­nan­cially, peo­ple still have an um­bil­i­cal cord at­tached to a prop­erty they own while ten­ants are liv­ing there. If you know you lack the nerves you need for rent­ing and yet you must move, you might be bet­ter off sell­ing with­out de­lay,” he says.

JUSTIN SUL­LI­VAN/GETTY

Many home­own­ers who con­vert a residence to a rental prop­erty are naive about what rent­ing en­tails, says El­iz­a­beth Wein­traub, a real es­tate bro­ker.

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