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A Guide for Involuntary Landlords

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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:

--- Quote from: Chieftain on April 23, 2012, 11:43:19 pm ---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.

--- End quote ---

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:

--- Quote from: Lipstick on a Hillary on April 24, 2012, 01:32:11 am ---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.

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

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