You've got a house you can't sell. Maybe it's the one you live in. Maybe it's the one you bought as an investment at the peak of the market a few years ago, thinking you'd do a fast flip for a big profit. Instead, there it sits, with a "For Sale" sign that's growing dusty and faded. What to do?
Consider renting it, suggests John A. Yoegel, a real estate expert, teacher and author. That can cover some or all of the mortgage while you wait for the market to improve so you can sell. Yoegel's new book, Surprise! You're a Landlord! A Guide to Renting Your Home When You Didn't Expect To (Adams Media, $12.95), explains the ins and outs of becoming an accidental landlord.
Yoegel paused to talk recently while he was disassembling the furniture in his Connecticut home office so he could carry it across the hall to a newly built addition. ("It's like building a boat in the basement," he said.)
Given the big inventory of available homes, how likely is it that you can find a tenant?
It's so regional, it's hard to say. There is a supply and demand issue. One of the things we're hearing about is people who are losing their houses, sadly, and are moving down the street and renting in the same neighborhood.
They can afford the rent; they just can't afford the mortgage. One of the things I'd hope would be very promising is the "rent with option to buy" alternative.
Is everybody cut out to be a landlord?
It depends on your aggravation quotient. It's all about the tenant. You can get only so much from interviews and reference checks and credit checks. When the rubber meets the road, you'll know when you've got a good tenant. But you need to be conscious of the fact that you're always looking at selling the house, not becoming a permanent landlord.
How about setting the rent? Can you charge enough to cover all your costs?
Given how much prices rose in the last big run-up, the chances that you can rent the house and cover your whole payment are pretty slim. But if you rent the house, you're relieved of the cost of fuel and utilities, which the tenants will pay. Say you can't make the monthly mortgage payment of $2,000 and you're going to lose the house. But if you can get $1,400 or $1,500 a month in rent, you may be able to keep the house. That can give you some respite, buy you some time, especially in a situation where you can move in with family and really cut your expenses so you don't lose the house. A year's breathing room may be just what you need.
What's the biggest mistake made by amateur landlords?
Going on instinct and not treating it like a business. Not doing the credit checks and the reference checks, getting too friendly with the tenant, being too casual about what the relationship is. Remember that a privilege or favor once granted is difficult to ungrant. You say, "No pets," but then you unbend and say, "Oh, it's only a cat," or "It's a small dog."
If I'm a potential tenant, what should I look for in a landlord?
Someone who treats the relationship professionally. You're not looking for a friend. You're looking for somebody to do business with who is going to do business with you. My experiences as a tenant, in the course of my life, have always been negative with the landlords who say, "Don't worry about it," i.e., we don't have to put that in the lease, or "I'll be here," so we don't have to worry. The assumption in anything unwritten or unresolved in a negotiation is that both sides walk away thinking it will be resolved to their benefit. It can't be resolved to the benefit of both sides.
As a tenant considering various rental properties, what should I look for?
Look for a new or recently built home that conforms to the current building codes, is energy-efficient, has smoke detectors and carbon-monoxide detectors. Of course you'll make a first cut in deciding where you want to live — is this near my job, is this where I want my kids to go to school, is this convenient to shopping and so forth. Is the house well maintained? That tells you the previous tenants were good ones, and it means that the owner will be responsive to any problems that may occur.
In the book you urge people to think of themselves as property managers and landlords, not as homeowners. How can they step away from the emotional side and put on their business hat?
I'm a believer in a little business plan (he offers an outline on Page 18 of the book). It doesn't have to be elaborate, but sit down and make a list of your expenses and your concerns. Get a copy of a model lease that's valid in your state (the book lists Web sites where sample leases are available), read through it, look at what it covers. You have to look at everything from a business point of view, and the business you're in now is renting a house you're hoping to sell.
It's easy to get caught up in the short-term goal of renting and to forget that ultimately you want to sell. You need to ask yourself: Will I continue to market the house while I'm leasing it, or will I pull it off the market because the market's so bad and I don't want to waste anybody's time, and just wait it out? If you continue to market the property, you need only one buyer, and you never know when that one buyer is going to come along.
Judy Stark, former Times homes and garden editor, is a freelance writer in St. Petersburg.