Rental Strategies by Rob Massey
RISMEDIA, July 8, 2008-With a weak home-sales market in many areas around the country, significant numbers of owners are now choosing to rent out the homes they really desire to sell. Prior to jumping in, people who fall into this category need to be advised of the realities and hazards relating to entering the business of being a landlord.
As the Realtor or managing agent representing a reluctant landlord, be aware that as a group they are needier, less financially secure and tend to require more time and hand-holding than most owner/investors.
To determine a general idea of the market rent, visit national Internet listing-service websites, such as www.rentals.com, and check out what other similar properties are commanding in the area of the subject property.
Next, the owners should plan on it taking at least two months to collect the first day’s rent. Figure into the cost of renting the expenses of yard maintenance and utilities while it’s vacant, along with ongoing maintenance expenses of 5 to 10% of the gross monthly rent once it is occupied. If there is no tax or insurance escrow, then add those expenses along with your fee for managing the property.
Finally, subtract the monthly cost of the mortgage payment.
Furthermore, let your clients know that this net figure is what can be anticipated only if there is no turnover or eviction during the year.
My experience has been that when homeowners rent out their houses in a bad sales market, their emotional ties to the property add stress and anxiety to an already tense situation. The renting option is certainly logical in some situations, but before advising this alternative to selling or agreeing to handle the management yourself, make sure that the homeowner understands the big picture of becoming a landlord.
Rob Massey, Jr., CPM, is founder of RentalHouses.com and a consultant for Rentals.com.
For more information, please visit www.rentals.com.