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In the advent of a market correction or recession, many homeowners may opt to rent properties as opposed to trying to sell in an unstable and already saturated buyers market. But landlording involves some savvy, so listen up and heed some valuable advice before diving into the world of renting and leasing your home.
Number one, take note that you’re not the only one is this position, so don’t immediately assume it’ll be easy as pie and that you’ll fetch a pretty penny in terms of your rental income. The reality is that in 2005 and 2006 when money flowed like Italian table wine, well everyone had the same idea to get rich fast through real estate. But in 2007 and 2008 it was a very different picture. Those folks became competitor landlords and it was dog eat dog for a while. If and when a recession hits, and with all the competition, there’s a possibility that there could be a lot on the market and rental prices could be driven steadily downward.
Especially if it’s a very competitive market, you’ll want to ensure your place gets rented and that it stays rented for a long while. Then, if that’s the case, your going to have to price your property right – and in most cases, this means under-pricing your property if necessary. So keep a close eye on similar rentals in your area and be prepared to bite the bullet and offer yours at a bit less than everyone else’s. You want to be the dog with the bone, right? So, jump through the right hoops Bo Bo…
Make sure you meet your prospective tenants and do a proper walk-though with them to take stock on the condition of the property and to go over the terms of the lease. Of course, you’ll also want to check up on their credentials and credit history. Be absolutely thorough with this. Ask for references, both professional and personal, and then call those references. You’ll also want to use your instinct as well – but some hard and fast research is necessary to ensure these new tenants will be good custodians of your property.
When contemplating the idea of renting, you must understand that there are still costs associated with renting a property. In many cases, you won’t always be able to charge as much as your monthly mortgage payments, so be prepared for that shocker. Also factor in maintenance fees, insurance, the cost to make ready and to clean-up/repair when the tenant moves out. Likewise, if you use a rental agency, this is another substantial cost to factor in. At the end of the day, you’ll want to compare these costs with the cost of selling your home and decide whether or not it’s actually worth it to rent your home out.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter, and podcast for seniors and retirees, that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 11 years as missionaries serving orphaned, abandoned and at-risk children.
