It’s no secret that the housing market has seen a dramatic increase over the last 12 months, and Orange County has had some of the nation’s biggest value increases. However, not every homeowner that wanted to sell this year has been able to get the asking price they were looking for. Should these homeowners take a lesser price, or look for another alternative? For many the answer has been to rent out their main personal residence, and try to wait out the market.
It makes sense in some circumstances considering rents have also seen a dramatic increase over the past few years. According to the Orange County Register, the rents in Southern Orange County saw a sizeable increase just over the last 12 months as well.
However, deciding to rent a home to a tenant is a big commitment, and may not work for everyone. There are a whole host of responsibilities that go along with becoming a landlord, and it’s imperative that all these considerations are understood before making a final decision.
Here is a quick list of items to consider before deciding to rent out your home:
Do you have enough funds to cover the mortgage if a tenant doesn’t pay?
There are many great renters out there, but as a landlord you have to be prepared for a “worst-case-scenario”. So if your tenants encounter a hardship, and cannot pay their rent for some reason, you have to be able to financially cover the mortgage amount for 1-6 months. Hopefully these hiccups don’t last too long, but if an eviction is necessary, a good landlord must be ready.
Will you hire a management company?
Property management companies can make the process of managing your rental much easier, but whether or not they are a good fit for your property is more difficult to discern. It’s important to interview several management companies, and a good idea to seek the advice of a third party before making any decisions.
How will owning a rental property affect your taxes?
In many cases, owning a rental property could mean good news for your tax liability. However, every case is unique, and you MUST seek the advice of a tax professional before making a final decision.
Are you in it for the long haul?
Are you planning on renting out your property for at least 2-5 years? If the answer is “No” it may be wiser to sell now, for the current market value. There’s a lot of time and energy that goes into renting a property. You wouldn’t want to put all of that effort in if you’re only going to sell 12 months later. Tenants may cause damage to your property during those 12 months as well. Carefully consider selling now if this is the case.
Do you have a list of professionals for handy work and fixes?
Make a list of home professionals that you feel comfortable with before renting out your property. When tenants ask for repairs you will be ready to go with someone you trust.
In the end, anyone considering renting out their home must consult with an experienced real estate professional to ensure they are covering all of their bases. Hakola & Associates are very experienced in guiding homeowners through the confusing process of becoming a landlord. Residential rental properties can be a fantastic investment, but should not be jumped into without the proper investigation and research.
Here are a few more resources to check out during this process:
http://www.buildium.com/8-tips-for-new-landlords/
http://realestate.msn.com/article.aspx?cp-documentid=13108384
http://www.nytimes.com/2011/11/20/realestate/tips-for-starter-landlords.html?_r=0
Photo provided by Regina Rentals
