Three Good Reasons to Sell Your House Instead of Becoming a Landlord
If there’s anything that’s certain about the housing market, it’s that there’s nothing certain about the housing market. While a hot market is typically viewed as a positive thing for home sellers in general, even a seller’s market doesn’t always guarantee that you will sell your house quickly, or even in a timely manner.
Of course, nothing instills more fear in the home-owner than a cold housing market. Not only is the economy working against you, but you also have to worry about timing. If you put your house up for sale too early and happen to get a decent offer but have no place else to go, you may have to pass on a good buyer.
On the other hand, wait too long to enter the market and you’ll get stuck with paying two mortgages or paying rent while also making mortgage payments.
Sometimes the temptation for you as a homeowner, especially if you are under a deadline, is to forgo trying to sell your house and rent it out instead.
The rationale makes sense, at least in theory. If I rent out my home for its market rental value I can continue to cover the mortgage payments. Then, in a Year or two when the housing market heats up again, I’ll put it up for sale.
While there is a certain amount of logic to that, there are some persuasive reasons to brave the market, hot or otherwise and sell your house instead of taking on tenants.
Here’s why:
* Consider the first rule of the housing market. Remember, there’s nothing certain about the housing market.
Let’s say that you’ve decided that you can reasonably continue to make extra mortgage payments for another 12-18 months. So you plan to watch the market for that time and when it makes an upward turn you’ll jump in. So what happens if the market does not take a turn for the better within your time frame? While housing market changes can sometimes happen quickly (within a few months), often a cold market can remain depressed for a period of years, and even decades.
While admittedly it is rare for a cold market to last for a decade or more, it is not uncommon for a cold housing market to last for two to five years.
If you aren’t prepared to carry two mortgages for a minimum of five years, then becoming a landlord to avoid having to sell your house in a cold market may not be the best option for you.
* The legalities of renting to tenants may be too restrictive for your situation. Suppose you take in tenants to cover your mortgage payments. For the sake of argument, let’s say that you plan to rent for two years and then put your home up for sale.
While two years might at first seem a long way off, it’s important to look at the possibilities that this arrangement might entail in terms of your legal responsibilities.
While laws may vary slightly from state to state, typically you are required by law as a landlord to give a tenant 2-3 months notice of eviction. This means that you’ll either have to give notice to your tenants after approximately one year and nine months, or you’ll have to sign a pre-arranged lease agreement for two years with no option to extend. What happens, then, when you lose your tenants, but it takes you months (or longer) to sell your house?
How will you cover the mortgage payments between the time that you lose your renters and the day that you sell your house? Worse, what if you receive a good offer that you have to pass on because you are locked into a lease agreement?
* Expenses often outweigh your profits. Contrary to what the general population tends to believe about real estate management, there isn’t a big profit in renting out property. If you don’t have a savings buffer to combat a “rainy day” event, don’t expect your monthly rental income will be enough to cover the mortgage plus incidental and maintenance costs.
Many landlords have found themselves in a money loss situation because they were not financially prepared for the cost of upkeeping a rental property.
Naturally there are a lot of things working against you if you find yourself having to sell your house in a cold housing market. However, when you consider the costs of NOT selling your house, you may find that even taking a loss on the sale of your home is a better alternative than entering the unpredictable property management realm.
Before you decide to become a landlord, consider all of the possibilities. You may realize that finding a competent real estate agent who is experienced in marketing homes in a cold market is the best way to sell your house and minimize your losses.
Jason Loucks is the Nation’s Leading Expert at Selling Houses and Investment Properties Fast and For Top Dollar. To Discover more about his “7 Day Sale” Method for selling properties at retail price in 7 Days, visit http://www.7DaySaleGuy.Com .