Seems weird that a guy who spends all his day trying to talk you into renting your home would write about the top 5 reasons NOT to rent your home.
You’re probably as skeptical as I would be reading this article and think I’ll come up with some fluffy reasons that really lead you back to renting your house. I hope you skeptics will read on, because I’m not going to hold any punches.
My mom recently sold her rental home. She’s owned it for years. I’ve even written about some problem tenants she had who I had to help her evict.
As you know when your mom asks a question you have to give some objective advice that is in her best interest and not always mine. So even though our company would stand to make money on her renting her home (yes, I charged my Mom), I told her it was best she sold the home.
Let’s take a quick look at 5 reasons you would want to follow in her footsteps and sell. . .
1. The rental return doesn’t justify the headache. This was my mom’s reason I told her to sell the house. After doing the math, I figured she was making about a 2-3% return on the home based on TODAY’s market value.
It is important to judge the investment on today’s value and not what you have invested in the home (or your basis). For a 3% return, she can invest her money somewhere that has very little headache and requires her to answer very few questions.
2. You have an emotional attachment (that can’t be broken) to the home. Everyone who lives in a home has some emotional attachment to it. It is the place you had Thanksgiving dinners, July 4th celebrations, and brought your first baby home.
However, when you lease your home, you are getting into a business deal. The new tenants, even if they are great ones, are going to have ordinary wear and tear on the home. The home will not look EXACTLY like it did when you left.
What people in this situation fail to see is that the home today, since they’ve been living in it, doesn’t look exactly like it did one year ago. It kind of like when someone says “your kids are getting so big” and, because you see them every day, you never noticed. The same principal holds true here. I’ve even seen people complain about the “tenant caused damage” only to realize later that it was like that when they moved from the home!
3. You may need to move into the home within the next year. We get calls like this all the time. When someone is moving away for 6 months and wants to rent the house for a brief period of time. Moving is just too much of a hassle to ask a tenant to move in and move out in 6 months and there are very few tenants who are willing to rent the home.
On the other hand, it may make perfect sense to rent your home if you plan on moving away for over a year and want to move back into your house at some point.
4. You can’t afford to pay your mortgage if the house has some repairs. I’m not saying that the money isn’t important to receive. I’m simply saying that if the water heater goes out and you can’t afford to fix it because your mortgage is due, you are in the wrong business (remember, it’s a business!).
You should have an adequate cushion of available funds in reserve to lease your home. Even if we lease it in the first 30 days, you probably won’t get a deposit for almost 60 days. You just need to be prepared for this and understand how the cash flow works. If you are cutting it tight, we suggest not doing it.
5. You have a family member or friend who is going to rent it. As I mentioned twice before, this is becomes a business deal when you decide to rent it. I’ve heard of some horrible family feuds because of how members treated each other’s homes.
We have had home owners come to us with their house because they just couldn’t evict their relatives…but they were OK with us walking through the process with their family member.
You’ve always heard not to do business with a family member and the same principal applies here.
Keep these thoughts in mind when you are deciding whether to rent your home. Sometimes the best client for us is the one who decides not to rent. Make sure you understand what you are getting into when you decide to rent your home and carefully consider various scenarios you may find yourself in down the road.