Like a gambler who doesn't want to lose more money to the house, some homeowners are choosing to rent out their homes for now and put them back on the selling block when the market improves.
"It really depends on the owner, but, if they don't have to sell, it may be a good time to hunker down and get some rental income while the market improves," said Mark Dilworth, a broker associate with Dilworth Realty Group of Vanguard GMAC Real Estate. "It's an option sellers certainly need to consider right now."
Dilworth has a listing in Atlantic Beach, a townhome that has been on the market for six months, and he anticipates the owners will look at rental opportunities once the listing expires next month.
But going the rental route can be a big gamble if you don't play your cards right - and the stakes may be higher than selling if you don't make the best choices up front.
RE/MAX Realtor Phyllis Staines said her first question to a seller thinking about renting their property is "What are your feelings about being a landlord?"
One of Staines recent clients owned a home within the Murabella Subdivision at World Golf Village. But when their work situation changed, the couple decided to sell their house, only one year old, to move closer to the office. They listed the home with Staines for $450,000.
"When they saw the offers, the possibility of renting came up, and we spent nearly two hours going over the pros and cons," she said. "Do you want to handle service calls at night when the toilets are stopped up? Heck, most of us as homeowners don't have anyone like that to call for home repairs ourselves."
Staines said it's a Realtor's duty to inform sellers on what they are getting into if they choose to rent.
"It's not really the best solution if you want to sell property later, because you may be obligated to the lease terms when you do find a buyer," she said. "But, if you need to bring some money in and want to give it a shot, planning and preparation are key."
Staines said most real estate experts expect, barring a major recession or major catastrophe like 9-11, the housing market will begin to rebound around the third quarter of the year. So, if you choose to rent your home to eventually sell it later, you may want to build-in the ability to show the home when you work out the rental agreement.
"I know a woman in Queens Harbour who had worked in real estate before and decided to rent out her property there, and she worked it out with the tenant to keep it 'show ready,' " Staines said. "Many leases allow the landlord to come on the property with 24 hours notice, but you can work out other arrangements in the contract. Make sure it's clear between the renter and the owner on what both sides expect when it comes to showing the property while it's occupied."
When setting the rent, Margaret Babish, managing partner of Bright Vision Mortgage, said it's important to look at rental rates for similar properties compared to yours, and then determine how much of your monthly mortgage payment will be covered by your rent payment.
"The main objective is to cover as much of your monthly note as possible," she said. "If you don't, figure out how much the shortfall is going to be when calculating your monthly budget."
Babish owns two rental properties herself - a condo in Amelia Island and a townhome in Jacksonville Beach. A "landlord" for the past two years, she chose to use a management company to handle both properties.
"The fees can range anywhere from 15 to 30 percent of the rental rate, depending on what the firm is responsible for," Babish said. "Some handle the cleaning, the yard work, while others may handle taxes, phone bills and other fees."
Babish said when you're working out the rental details, be sure to get some sort of deposit up front from your new tenant.
"I usually ask for one month's rent up front," she said. "That way, you'll cover yourself for most normal wear and tear at your property. If your tenant can't come up with a deposit, it should raise a red flag."
She emphasized that running a credit check on the renter is one of the most important things a landlord can do.
"I'm actually surprised at how many don't," she said. "Whether it's a good or bad report, I want to see it," she said. "There can be many explanations for a bad credit report. The renter could have had medical issues, an accident, job loss or other things that affect it negatively. And, that doesn't mean they would be a bad renter. You just need to have a full understanding of their situation going into the arrangement."
For those who get into renting with the anticipation of putting the home back on the market later in the year, Dilworth said they shouldn't anticipate price points will immediately come back to those we saw in 2005.
"It's not going to be a V curve in terms of home values, or like an elevator going straight back to the top floor," Dilworth said. "Prices will probably climb very slowly. Homeowners just need to know that it may be months or years after the market begins to turn around that they will see the same offer levels we experienced two to three years ago."
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