Should You Rent Your Home if it Won’t Sell, Part II
I covered the financial aspect of renting your home in a previous post. However, there are other tangible and intangible reasons you may or may not want to rent your home. Let’s review the pros and cons:
Reasons You May Want To Rent Your Home
- You’re Underwater – This was covered somewhat in the previous post. If you don’t have sufficient funds to bring to a closing where you owe the bank more than your property will sell for, you may not have any other option except the “F” word (“Foreclosure“).
- Appreciation – Historically, U.S. homes have appreciated by 5% per year. Even if you lose a modest amount by renting the property, the appreciation may more than make up for it.
- Inflation – If rent in your neighborhood is currently $1000 for a comparable home, is there a chance it will be $1000 in 20 years. Probably not: it’ll be more. New landlord, inflation is now your friend!
- You’ll Eventually Own the Property – This is a great idea for retirement. After 15 to 30 years of paying the mortgage, the loan is paid off! This takes some long term planning and an investor’s mentality.
- Emotional Attachment – I had this to an extent. I spent five years rehabbing my house and had no qualms about keeping it if it made financial sense.
Reasons You May Not Want To Rent Your Home
- Upkeep and Maintenance – Renters don’t care how long it took you to sand and polyurethane the hardwood floors. You know it since you’ve probably rented before yourself. More to the point, if the toilet breaks, someone will need to get in there asap to fix it. That will cost you time, money and stress even if it’s not you doing the work.
- Deadbeat Renters – Outwardly, there’s very little difference between good paying renters and deadbeats. Deadbeats don’t have beady eyes or drive crappy cars (to the contrary, they drive nice cars because they’re not paying rent). And besides unpaid rent, it can take a lot of time and money to evict a renter.
- Vacancy – When no one is renting your property, the bank doesn’t give you a pass. You still have to pay the mortgage.
- Intentions to Buy Another Home – Unfortunately, it will take time before the bank accepts that your rental income offsets your rental expenses. Most banks will need two years of rental income before they allow you to show it as income for lending purposes. Don’t plan on making a home purchase based on your financial situation alone for at least that long unless your raking in big cash at work.
My advice is that if you’re considering renting, don’t go into it with thoughts of making instant money. In fact, expect to take a loss in terms of both your money and your time. It’s a longterm proposition to make money renting homes.