The Question – Should I rent my South Phoenix home
There is an add on the radio for a property rental company that states “ Don’t sell your South Phoenix home, rent it”. It actually is a great advertisement, and they make a very good case for renting out your home. Yet, as a home owner that is considering renting out your home, there are several things you should consider, which the advertisement does not state, or actually may imply is simple easy stuff.
Should you sell or rent your home, first question to ask.
The financial reason. Does it even make sense to be a property rental? What are the averages for rental properties that are similar to your property? Can you expect to get the average rent, or will you be more likely to get above or even below market rent? This likely will depend on many things such as condition of home, age of home, location of home, the community it is in, proximity to retail, commute times to central area and many other items. Is the home in better condition than the other similar homes renting in the area, maybe home has many more upgrades such as granite counters, private pool, 3 car garage, larger lot, maybe better location in community like a cul-de-sac. So where do you line up with rentals in your area, and what can you expect to rent property for is a great question and one you should be considering. Once you have an idea of what your could potentially rent your property for on a monthly basis, you ask yourself the question does it make financial sense to be a renter?
Does it make financial sense to be a renter? Does the average rent you can expect for your property make the idea of renting the property appealing? If you owe money on the property, will the amount of rent cover the monthly payment as well as other fees associated with the ownership of the home? Will you be renting the home yourself, or will you be placing a property rental management company to be in charge?
The key is to know your expenses and expectations for potential income. Beyond knowing the expenses and potential income, it is just really a matter of math. Yes, math, add and subtract your costs and income and is there money left over. If there is no income after expenses, then you are at the very least breaking even. If you have a negative balance, chances are renting is not for you at this point, as you will be paying out a monthly payment to rent out your home and cover all expenses. Now, if you deduct all your expenses, and still have money left, and it is a good chunk of change, well then renting may just be right for you.
The important point I make though, is really know if it makes sense. No sense renting it out unless you do know what your doing, and your okay with the end result. I know some folks that are renting, are paying a monthly amount out of pocket to be landlords, but they are waiting for appreciation. They understand this, an that is ok, so long as one understands.
Should you rent your home, second question to ask.
Who will be doing the property management and what fees can I expect on a monthly or annual basis. You may decide to do the property rental yourself, and that is fine. You may also decide to have a property rental company take charge. Couple of things to consider either way. Will whoever is doing the job, going to do a good job. Will the responsible party take the time to properly market the house to get good potential tenants to view and submit applications to rent home? Who will review application and are there forms in place to take applications for the rental. Does person taking charge have the ability to review and even pull credit for the potential renters? Will the party responsible help make the decision that is best for who to rent property to? If the responsible party is the home owner, do they have the time, experience and tools necessary to market the home, take in offers and then the ability to gather all information to make a informed decision? Also, if property rental company will the company actually pull all the information for home owner so that home owner can review applicants information and make a rental decision based on all necessary information.
Also, who will be in charge of the monthly duties of the rental. See, it is not just renting property out, it is also monthly activities that must be done. Sometimes the check does appear in the mail box, but many other times one must go chase it down. Who will be collecting the rent, and ensuring timely payment? Don’t forget, the person that takes in the rent must also be able to keep a detailed journal of payments and fees associated with the rental. Many owners prefer to have a rental company deal with it all, and that is fine. Just be sure to get a reputable company that does truly market the home, review and suggest the best rental candidates, and does indeed do the monthly upkeep of all rental details. Most rental companies will charge about 8-10% of the monthly rental, so expect to pay out some of that money coming in.
Did this help? Hope it did. One other thing to keep in mind. Sometimes a rental property will be vacant for a period of time. Can you as a home owner/landlord afford to make the payment during the times of vacancy? Also do you have the ability to make payments on repairs? What repairs you might ask right, well those would be the maintenance items that come up including also sometimes emergency repairs. Maybe the rental property had a leak for the water heater, or a plumbing leak, leaky toilet, bad a/c unit…………..the list can go on.
There are a lot of variables and renting out your home is not so simple. There are a lot of moving parts, and all needs to line up. If it does, great then you have a property that would be a great rental. If so, rent it out, collect rent and built your wealth through rental properties. But it does have to make sense.
One line in the add is that homes are still about 20% under pre recession home values. Let us not forget too, that home values sky rocketed out of control and where for the most part over priced for that time too. It could be years before home values hit the mark your aiming for. So, don’t sell your South Phoenix home, rent it, may not be for you.