A Guide for Involuntary Landlords

[gogogodzilla]

By Rachel Koning Beals

Can't sell your home and have to rent it out? The pros offer a few tips

JewishWorldReview.com

(USNWR) A spotty housing market has turned some would-be home sellers into temporary landlords because they can't unload their house as quickly as they need to or at the price they want.

The demands of keeping up with their day jobs and the difficulty of managing the property from across town or out of state (or the expense of hiring a manager) add to the complexity. Renting out a property may not be ideal, but neither is leaving it empty for too long.

"It all comes down to perception for buyers, who understand that vacant homes can suffer from a wide variety of ills due to neglect and deferred maintenance," said agents with Prudential Shimmering Sands Realty in Panama City, Fla., on their blog.

Think turning into a temporary landlord might help you? Educate yourself before jumping in.

For starters, there are big-picture considerations. There's more rental competition because of a soft home-selling market in most locations. To start the year, there were 2.43 million homes for sale, a 6.4-month supply at the current sales pace, according to the National Association of Realtors. But there's also potentially stronger demand for rentals because tougher mortgage standards and a stubbornly high (if improving) unemployment rate prevent some people from buying. Overall, more would-be buyers may be willing to rent if they remain uncertain about the health of the economy.

Collecting rent to offset the mortgage payment on an unsold home can be vital to your monthly finances, especially if you've taken on a loan for the new place. While renting out your home, it may be possible to continue to build equity, depending on how quickly market conditions turn. The S&P/Case-Shiller Home Price Index, a closely followed measure of the U.S. residential housing market, suggests that housing prices may be bottoming out this spring. (It's a good idea to keep your expectations realistic as market performance often varies region by region; remember, there was a reason the home didn't sell on your preferred timeline in the first place.)

Tax considerations. There can be favorable tax advantages for landlords on top of mortgage-interest deductions such as deducting the cost of repairs, property management services, and even qualified travel related to tending to the rental property. Keep in mind, however, that you'll be on the hook for property taxes on your unsold listing.

Sellers are allowed to exclude as much as $250,000 of profit ($500,000 for couples) from capital gains taxes as long as they've lived in their home for two out of the five years leading up to the sale. That gives sellers three years to unload the property from the time they move out. Of course, selling at a loss negates the need to claim capital gains.

One option, although perhaps not the first choice, is to donate the home for a set length of time to a nonprofit that needs office space, for instance. You won't make as much as you would renting it out, but you will potentially avoid an unoccupied home that falls victim to neglect. You could get a tax deduction for the charitable donation, and you'll get the satisfaction of helping out a worthy cause.

Go-slow sale. Some sellers may go for a rent-to-buy option on their home. This is attractive to a buyer who's not quite ready to jump into a long-term commitment or needs this go-slow financing option because he or she is having difficulty securing traditional financing. Time and attention are still required at the old property and a seller will be locked in at today's lower housing prices.

(more at: http://www.jewishworldreview.com/0412/involuntary_landlords.php3)

[Chieftain]

The number one piece of advice I would give anyone who is considering renting their house is to hire a professional property manager to keep an eye on the place for you and to give you a buffer between you and your tenant.  Have the property management firm do the background checks and applications for rent for you, and give them written instructions about who is responsible for what items.

The fees the property manager charges you are tax deductible as an expense of renting and goes to offset the income of the rent, as does any other expense related to the property.

Just be extremely careful.  The stories are legion of property owners renting out the house only to find it has been used for growing marijuana or had a meth lab in it.  Either activity can and will cause permanent damage to your home that many insurance companies simply will not pay for.

[Oceander]

Also avoid Section 8 tenants like the plague.

[Lipstick on a Hillary]

The number one piece of advice I would give anyone who is considering renting their house is to hire a professional property manager to keep an eye on the place for you and to give you a buffer between you and your tenant.  Have the property management firm do the background checks and applications for rent for you, and give them written instructions about who is responsible for what items.

The fees the property manager charges you are tax deductible as an expense of renting and goes to offset the income of the rent, as does any other expense related to the property.

Just be extremely careful.  The stories are legion of property owners renting out the house only to find it has been used for growing marijuana or had a meth lab in it.  Either activity can and will cause permanent damage to your home that many insurance companies simply will not pay for.

My husband died in October, and left me a rental duplex.  I am lucky, I have 2 nice single woman tenants-one upstairs, one downstairs.  My husband always took care of all the rental duties himself, but I have to admit I feel overwhelmed by it sometimes--I have been thinking of going with a property management co.  Thanks for the post.

[truth_seeker]

My husband died in October, and left me a rental duplex.  I am lucky, I have 2 nice single woman tenants-one upstairs, one downstairs.  My husband always took care of all the rental duties himself, but I have to admit I feel overwhelmed by it sometimes--I have been thinking of going with a property management co.  Thanks for the post.

You can interview several, learn how long in business, how many units under management, fees, etc.

[Chieftain]

Over the winter, the Southwest Washington Joint Drug Task Force simultaneously raided 56 houses, most of which were rentals, here in Vancouver.  All of them were rented by a Vietnamese drug gang, who set up a Viet family in the house where they squatted in the living room and tended between 200 and 500 marijuana plants in each house.  None of these people were legal, they were being brought in from Hawaii and Seattle to run the houses, and all of the pot they grew was being sent out of State, and had nothing to whatsoever to do with "medical" marijuana. 

They rented these houses and paid the landlord/owners on a regular basis  Several of the homes were owned by elderly people who were living retired out of state and they appreciated the income.  However, most of the houses had been in use for almost 3 years growing pot, and the high humidity inside the homes had mildewed almost everything.

And to top it off, if your home is used for a continuing criminal enterprise, the damage incurred can and likely will be disallowed by the insurance company.  There are homeowners in Portland that had meth labs set up inside the house, and contaminated the flooring down to the joists with chemical residue.  There is nothing you can do except start ripping out all of the contaminated material, and because it is Hazmat you have to pay for special handling and disposal.  There are homes in Portland right now that are uninhabitable and abandoned directly because of meth labs.

When I owned a house in Newport News Virginia back in the 80's, the house across the street got rented out to a bunch of bikers.  The owner was transferred out of town and wasn't around for 3 years, and when he finally got back in town he had them evicted for non payment, but the house was completely trashed.  They had torn a motorcycle down to parade rest in the living room; right in the middle of the floor.  There was an oil stain 8 feet around in the carpet that soaked all the way through the flooring and into the joists.  The only way to get the smell out was replace the lumber, and it took him a year and a half to fix the place well enough to sell it.

Beware renting, especially these days.  You have all kinds of people who bogued on a mortgage out there who figure they'll just rent for a couple of years till they outrun the foreclosure, and won't hesitate to stick it where the sun don't shine if you let them....

[U-238]

Also avoid Section 8 tenants like the plague.

Good Point!!