There are many examples of homeowners suddenly feeling as if they need to rent their house. Perhaps you’ve recently inherited an unwanted property from a relative or perhaps you’re just stuck with a property from a divorce and it’s filled with bad memories. When folks fall into these situations, their minds tend to turn toward renting the house out as a viable possibility. Determining whether or not that’s a good idea is a multi-level process that will often boil down to whether you have the time to be the landlord at the beck and call of your residents. If you’ve recently come into possession of a property you’d like to rent out or think it’s a good solution to your current real estate predicament, we’re here to help you determine what the next move should be based on a few different factors.
Will This Unwanted House Generate Cash Flow
The first thing to consider when determining what to do with your unwanted house is the math behind each decision. Set up a spreadsheet and find out what the costs of the property that you can see accruing now will equal to in the future. Include factors like the mortgage, taxes, insurance, utilities (if you’re going to share the load with the renter), vacancy costs, HOAs and repairs. If after all of this, you’re looking at a loss instead of a profit, you should probably sell the house. Mostly because the majority of the cost associated with being a renter is the hidden maintenance costs and little surprises from the residents that can push a supposedly profitable property into unprofitable territory.
Is Selling Worth It?
The answer depends. In the market we’re in currently, there are very few people with a fixer-upper attitude looking for homes in the Northern Colorado area. This is especially true, since new housing developments offer the same kinds of properties, but with modern luxuries. Your unwanted house will most likely need plenty of repairs and time invested before it’s ready to put on the market, then you’ll be looking at even more time for it to remain on the market and catch a buyer’s interest. Then you’ll have to pay the realtor their fees, which in “flush” markets tends to be higher than it usually is, in addition to closing costs and other hidden costs that could be lurking in the wings for you. This is especially inconvenient if you need to liquidate the property quickly for a will or to pay off lawyer expenses and much more.
Return on Investment
Whether you inherited the property or bought it yourself, real estate is still an investment, which means whenever you’re considering disposing of an asset, you’ll need to calculate your return on investment before proceeding. For example, if you were looking to make around $100,000 in profit but would only acquire $1,000 per year in pure cash flow, that’s only a one percent return on your investment, which isn’t worth your time.
Determine The Risk
If you bought the property, you might be faltering because of that old rule that you should stay in a home for five years. The idea behind that saying is that real estate’s value will only go up, but the housing bubble in 2006 and the one that’s happening right now according to several experts, are proving that saying to no longer be true. This means that many of the homeowners that purchased their homes in the last 10 years are still underwater because of this housing crisis, and what’s worse is that another one is coming. Since this housing bubble is coming so fast after the previous housing crisis, it’s hard for economists to determine how long it will take for local markets to recover. If you’re worried about how the future is about to unfold because your financial situation is already in less than perfect shape, perhaps you should look into selling your property at a loss, rather than struggling to scrape money from a dying market.
We’ll Pay Cash For Houses
Rather than accruing more costs and hassle, consider pursuing a quick sale as an option. Quicksales are a great option for divorcees as well as folks who recently inherited a property, and those who just need to get out of a bad investment. Contact us to find out more about how and why we pay cash for houses in the Northern Colorado area. If you’re still not convinced that renting isn’t the best option for you, watch our blog where we’ll feature the cost of renting a house out prominently among our articles.