A new sign for sellersWritten by Jody Zink | | email@example.com
For months, the For Sale sign weathers the elements near the street and goes it alone. That is, until there’s a new kid sharing the lawn. You may have seen the For Sale sign meeting his new friend, the For Rent sign.
Homeowners who’ve moved up or out of town are still trying to sell. They never really set out to be landlords, but out of necessity are forced to find a way to generate enough money to carry their costs. So instead of sitting on a vacant house, sellers — often reluctantly — are trying to generate rental income until a market turnaround.
The decision on whether to turn a property into a rental is worth taking a hard, hard look at. Find the wrong tenants and you could wind up with a larger problem than when you started. Plus, you’re taking it off the market. Is it worth losing that marketing time? If it doesn’t rent right away, you’re still paying taxes, utilities and insurance. Re-evaluating the marketing plan, cutting the price and moving it now may serve you better long term.
However, once it’s decided that renting is the way to go, the accidental landlord must make more decisions. Do I hire a property manager? What should I charge for rent? Who is the right tenant? Where do I find him or her? A Realtor can help you with this.
Also, be clear to prospective tenants you plan to sell the house. Try keeping them until the property is sold. That way if the sale isn’t completed, you won’t need to find new renters. You might offer an incentive such as paying a portion of moving expenses or lowering the rent when putting the house back on the market.
Consider checking credit and background. Once you’ve got the right applicant, get the lease in writing even if your tenant is a close friend or family member. It can be a simple month-to-month agreement. You’re entering a business relationship, and this way everyone is clear on the terms. What about pets? Smokers? Spell it out. Both parties have responsibilities. If the unexpected happens, having a definite agreement can be very important.
Don’t forget about Uncle Sam. For the best tax benefit, you want the landlord stint to last no more than three years. After that, you’ll have to pay a capital gains tax on the home’s profit since you bought it. If that happens, you could end up paying more to the government than you gained by renting.
On the other hand, if you live in your home for two of the five years before you sell, you pay no taxes on up to a half million in profits if you’re married; $250,000 for singles.
Being a landlord requires serious commitment, and setting yourself up to win from the very beginning is crucial. It’s likely the ranks of accidental, hesitant landlords will grow, as many sellers hold out for acceptable prices.
Jody Zink is a licensed Realtor in Ohio and Michigan with Loss Realty Group. She can be reached at (419) 725-1881 or through her Web site at www.JodyZink.com