In many ways, October is one of my favorite months of the year - crunchy, vibrant colored leaves under your feet, warm Starbucks Pumpkin Spiced Lattes, and cackling witches flying through the brisk air. (That is, however, unless it's October of 2017, in which case you may still be sporting sunglasses and a tank top...) Either way, this is the time of year when I finally get to pop my head above water, catch my breath, and begin the process of settling in for the colder weather to come.
Unfortunately, late autumn also happens to be a month in which many sellers begin to experience the pre-holiday, winter angst (and, in some cases, desperation) about the fact that they have not yet sold their property. An incredibly common question this time of year is, "What should I do?”. The standard and traditional answer is that there are four options for homeowners who find themselves in this situation (this may look familiar if you've followed our recent blogs!!).
1. Take the house off of the market until after the first of the year.
2. Improve or renovate the property so that it's worth what it is that buyers are saying it is currently not.
3. Lower the price.
4. Rent the property.
If you read our last blog on price reductions and felt a bit nauseous, you're probably scrambling for any other viable option. From my perspective, the least intelligent and potentially most harmful of these four options is that of leasing your property to a prospective tenant. Inevitably, the exercise of renting your residence is one of doing nothing other than putting off the inevitable.
As you’ve probably heard numerous times by now, homeowners need to secure an offer and sell their home before the market closes down in the middle of November. Given that this is Rochester, NY, the value of a property doesn't increase tremendously over a 6-month period of time. If one is lucky, a seller may see an increase of 2% in the value of their home. This increase needs to be weighed against the prospective damage that a less-than-fastidious tenant may inflict. Stated another way, if a $200,000 property is taken off the market in October and remains tenant-occupied until April, the house may increase in value by $4,000. However, what are the costs associated with having painters come in and touch up dirty or damaged walls? What is the cost of having the carpet steam cleaned? My experience points to the fact that newly minted landlords typically spend close to $1,500 in order to bring their house back to the condition that it was in prior to tenants taking up residence.
When couched in these terms, most homeowners quickly come to the realization that it’s not worth renting their home for six months for the possibility of a $2,500 gain. There’s just not enough upside but there is a lot of potential downside!! Smokers come to mind, as do pets. What about evictions? One obvious expense that we haven’t touched on is the difficulty of finding a tenant to rent your home. Experienced landlords know that it’s incredibly difficult to find a tenant to rent an apartment or home from October 1st through March 1st.
In short, even under the best of circumstances, the task of finding a tenant willing to pay enough rent to cover your monthly mortgage, and, at the same time, maintain your residence without doing a lot of neglectful damage is a tough one to expedite. It’s probably best to recognize that renting your home is doing nothing other than kicking the proverbial can down the road – a road that is fraught with real, potential danger. Do yourself a favor – consider the other three options laid out as possibilities earlier in this blog and choose one. You’ll be much better off!