Homeowners Rent Properties To Wait Out Slumping Market
There have been instances over the years that made Bill Lederer decide to rent out his property to eager leasers. At other pivotal moments though, economic circumstances have thrust the Illinois resident into the role of landlord more or less out of his control.
With a housing market that can, at best, be described as hobbling, this concept of accidental landlords is taking on greater significance across the nation and the Washington region, as families who want to move onto a new home make the tough call to rent out their current property until they can sell it at any inkling of a reasonable price, according to realtors and economists.
Because of Lederer’s extensive experience on all sides of the landlord coin, he launched CompleteLandlord.com a year ago to provide information and guidance to this growing group of homeowners.
Based on the latest surveys done by the popular site’s staff, as many as 15 percent of their clients are new landlords who described themselves as homeowners with virtually no choice in such a faltering economy but to take the landlord leap.
“We get calls and e-mails several times an hour, 22 hours a day from these people,” he said. “My sense is that they didn’t know going in that they’d be landlords and are now accidental landlords.”
Robert Israel, with the local firm Gerlach Real Estate, agrees that the phenomenon has seen a recent surge in the region. He estimates that anywhere between 10 percent and 15 percent of his clientele fits the mold.
“It’s an important amount of people,” Israel said. “If they don’t want to reduce their sale price to the price that we recommend, [renting is] an option. Most times the rental prices will cover their expenses.”
Both experts agree that the arrangement, while unplanned, can be beneficial. Who, though, should not transition from mere homeowner to landlord? It boils down to means and motivation, they say.
“If you have a willingness to take the occasional call, if you’ve got the willingness to take on what comes with the human condition, you’ll be OK,” Lederer said. “It can actually be a very successful and satisfying experience.”
Israel adds to this list that beyond attitude, would-be landlords also have to have some money they’re able to put into their newfound rental project. “Someone who can’t keep up payments on the house and afford to do upkeep, I would not recommend it to,” he said.
The real estate rule of thumb lately, he explained, is that if a home has been on the market for 90 days to no effect, then the owner should reduce the price by 5 percent or 10 percent for prospective buyers to “even take any notice.”
But if owners are ready to move onto a new home but not ready to take the hit in profit they’d likely incur if they sold their current property now, renting it out is probably the best bet to recoup their investment down the line. Another benefit is that the region has no shortage of renters at the moment, so there’s a ready tenant pool from which to choose.
But first, Lederer takes the tact that preparation is a must in switching to landlord status. This means being incredibly selective when it comes to tenants. For starters, he says, advertisements should be local, not on national sites where D.C. area residents looking to rent would not naturally look. Homeowners are best advised to stick to a specific set of criteria. Thus, if a possible renter asks an excessive amount of questions about canines and the property is not ideal for pets, the relationship probably won’t be a match.
“You don’t want to create a whole other set of problems for yourself when the idea is to escape problems with the market,” Lederer said.
Also, he recommends checking out applicants well beyond their credit, which is just one factor to be taken into account.
CompleteLandlord.com is one of a number of third-party venders that charges a minimal fee for its purveyors to do what he considers complete background checks. For , staff members scan the person’s criminal history in all the nation’s states and verify whether they are on any terrorist watch lists or sex offender registries. They also look at eviction and other renting-related issues in the person’s past. The process can take just minutes or hours depending on the applicant.
“You’re looking for a tenant who will treat the property as if it were their own, who thinks like a resident — not a tenant,” Lederer said, adding, “You’re looking for honesty. It could be that they have decent credit but they have made bad choices in other areas of their life.”
Using a third-party agent that can produce documentation to back up these claims is especially advantageous, he points out. “Federal laws say that if you don’t check on the president’s terrorist watch list you can be fined. And if someone is turned down and there’s not a third-party report, you could be sued for discrimination,” Lederer said. “So really it’s a matter of protecting yourself.”
Additionally, Israel suggests boning up on local landlord regulations, which vary a great deal between states and jurisdictions. Across the region, most landlords are required to register their property, disclose the amount of lead present, and be subject to inspections of the home from time to time by government agents.
Sometimes, the sheer number of variables that a landlord must deal with makes partnering with a property management firm a viable option, especially for landlords that have upward of 10 tenants.
Doing so will create an atmosphere where the homeowner is part of a team. Even if the management firm strategy is not employed, experts suggest staying in regular touch with construction and electrical professionals that can fix house deficiencies when they arise.
It may not be as simple as remaining in your home while you sit out the market turbulence, but renting is a smart compromise for folks ready to leave their property but not leave empty-handed. Still, as Lederer put it: “This is really not something to be entered lightly into.”
About the Author
Dena Levitz is a freelance writer in Washington, D.C.