To rent or not to rent; that is the question
With the ups and downs of the residential resale market over the past five years, sellers have frequently been faced with the question of what to do with their home if it will not sell. Many have opted to remain in the home and weather out the storm. Others, some by choice most out of necessity, have been forced to become “unintended landlords.” As a professional property manager I have always felt it my duty to make sure when people are trying to determine if they should rent their home out or not, they fully understand some of the potential short and long term consequences. Here are few tips to keep in mind when making an informed decision.
Be aware of the legal responsibilities. Virginia Law requires landlords to abide by and required to maintain the property regardless if you are the occupant or not. There are state and federal Fair Housing laws that govern and protect consumers; as well as the legal system that protects both tenants and landlords in the event of a dispute.
Be financially conscious. Know that the fair rental rate on the house often will not be what your mortgage payment is. There is a possibility of a considerable gap. You need to be aware that there will come a time for a maintenance matter or repair that could arise at any time. It could come up the day after you move out or six months down the road. These repairs could be minimal all the way to replacing an HVAC system. You will have to be mindful that these items could come up and it would be your responsibility to repair or replace. Just be as financially prepared as possible. Be ready for a vacancy or delinquency on a rental payment by a tenant; and how you plan on making the mortgage payment during these times. Consult with a tax advisor regarding potential tax implications on the rental income you will have to claim and the allowable deductions. There are certain tax laws regarding items like Capital Gains and changes in tax brackets you need to be fully aware of.
Be realistic. It is important to know that nothing is one hundred percent guaranteed. You may find a tenant who does exactly what is required of them to have an ideal rental situation or you could have a bad lasting experience. As stated before, repairs could come up every day or once in a blue moon. You could be successful in never having a vacancy or the house can sit empty for five months. These are some of the unknowns but there are safeguards you can take to try and ensure a successful leasing experience. Consult with a professional, reputable full time property management company. Full time property management companies assist you in everything I have informed you of above and beyond. They are not attorneys nor tax advisors, but if they do not have the answer, you will be guided to the proper resources .
After reading this column, you may be asking yourself “why in the world would anyone want to become a landlord?” My attempts were not to shy you away from the idea; but to help make sure that as you consider becoming a landlord you know what is expected, potential hurdles and to help you make a more informed decision. Renting out a house is not as easy as throwing up a rental sign in the yard and hope all goes well. It is business decision that requires both short and long term planning. Remember, you contacted a real estate professional for guidance on selling your home, do the same for renting it out.