September 27th, 2010, posted by Brandon
So you put your house on the market at what you thought was a “fair price” which “left a little bit of room to negotiate” and nothing… Crickets… It may now be time to think seriously about Plan B – rent it or reduce it.
At first glance you may be tempted to rent, but you should consider the following. 1) your tax rate will likely change and you’ll have to pay more each year as an “investor” owner. 2) If you want to refinance, you will not be eligible for those fantastic owner occupied rates any more. 3) Your local jurisdiction will likely require you to register which will walk you through an application and inspection process. 4) You may now be subject to tenant’s rights when you want to sell again.
I frequently advise clients to rent rather than reduce, but you need to understand the reality of being a landlord. Many of my clients end up hiring a management company which will charge 8-12% of the monthly rent to handle the midnight “my toilet is leaking” call.
If you’re not sure what to do, call me – we’ll go over the details of your situation and I’ll run through the pros and cons of owning the property as a rental. If you do decide to rent, your horizon should be at least 3-5 years to make it financially feasible.