As a followup to this item, on Sunday July 20, the New York Times ran a great article on this very topic, written by Vivian Marino (article link below), which I think is right on the mark in covering the issue.

In the article, Ms Marino talks about a “new class of real estate investors- accidental landlords”, and walks through the stories of several actual owners who are (or have recently) dealt with the issue of not wanting or being able to sell their homes in the current market, and working through the issues of how to handle the property as a rental. Landlord-tenant, Fair Housing, caution about sourcing a lease to adequately protect the owner, managing vendors for repairs and maintenance, and the importance of screening tenants are important issues which the article raises.

Ms. Marino also talks about the value of professional Property Management, which I have discussed as well in earlier blogs. Essentially, managing a property effectively while navigating all of the above concerns can not only be challenging for an “accidental landlord”, but can also be a full time job. For what is a pretty nominal fee (generally $100-$200 a month on average), a Property Manager is a trusted professional resource who can provide expertise and has the knowledge and experience to manage properties effectively. Ms Marino also wisely points out that Property Managers “vary tremendously”, and owners should use references and referrals to find one they feel comfortable with. In addition to personal referrals from friends or colleagues, she also recommends NARPM (National Association of Residential Property Managers- www.narpm.org) as a referral resource. In addition to these, I personally find that a good way to tell how well a PM manages their properties is to drive by some of their properties. As you see signs or rental listings for a particular manager (and consider the impression their marketing makes on you as well), take a trip by the property. Is it well maintained, kept tidy (garbage cans off the street, etc), have they polished up all of the curb appeal elements? This is the best way to know how they will manage your property as well.

The only aspect that I felt the article under-represented was the “relax, it doesn’t have to keep you awake at night” factor. Of course turning your home into a rental property is a big deal, and yes as I’ve pointed out there are a lot of complicated issues that bear on the situation. But with a little bit of education and awareness about them, you will be able to make informed decisions, and you should do so, then let it go, don’t overthink or worry incessantly about it. If you are reading Property Management blogs and doing some cursory research, you understand the issues enough to know your resources.

“Landlords, if only by accident”, NYT July 20, 2008 is highly recommended reading for all of the “Accidental Landlords” out there.

http://www.nytimes.com/2008/07/20/realestate/20sqft.html?_r=…

Mon Jul 21 2008, 10:27

Hi Jocelyn,
I provided a version of this answer to a similar question, so it's worth responding here as well, as a lot of owners are really struggling with this very question these days (you definitely are not alone!).

Whether renting is an alternative to selling is something that's based on the specific needs of each seller. Many owners rightly think about rental cashflow, as well as the market forecast over the next 18-24 months. I would add to this some additional things to consider as well:

-If you aren't depending on the sale in order to close an another purchase , than renting certainly should be something you consider. It is a buyers market right now, and while prices could continue to fluctuate in the short term, it could be prudent to hold onto the property as a rental for one or more years to see how things play out. Over the longer term, real estate historically has continued to increase in value- the question today is how much and over what timeline. So, waiting things out isn't a bad alternative if that's an option for you.

-Somthing that you should also think through is that income property (which is what a home becomes as a non-owner occupied rental) has financial benefits beyond simple rental cash flow. As income property, it's treated tax-wise somewhat like a business, meaning that operating expenses (utilities you pay, repairs, taxes, insurance, mortgage interest, management, etc), depreciation and other costs are deducted from the gross rental income in order to determine taxable income for the property. The affect can be a dramatic tax benefit depending on the specifics involved. So, owners should confer with a CPA or other resource to consider these benefits in addition to simple "rent less mortgage" cash flow impacts.

-Finally- being a landlord is not something that everyone is prepared to become. There are landlord-Tenant laws, tenant screening, vendor management (like, knowing a reliable plumber who doesn't charge an arm and a leg to fix a leaky faucet), tenant relations (for example, what are your options if the tenants break one or more of the terms of the lease?, or, what are your obligations if they want to paint the interior in leiu of part of the rent, etc), and myriad other issues that, unless an owner does a lot of research first and/or have the time to take on landlording as a "part time" or even "full time" job, s/he may not be effective at self-managing the rental. In these cases, using a professional property manager provides you with a trusted professional resource to navigate rental property issues confidently. I have some questions/criteria you should consider in choosing a property manager, and would be glad to share those with you.

I know I've thrown a lot of information out here, but wanted to provide some depth around the question. Good luck with your home (and welcome to West Seattle!)

Rob

Sat Jun 14 2008, 13:03

You posted this question a while ago, I'm curious what you decided to do?

Sun May 25 2008, 18:06

As with most things, it depends. Being a former accountant, I always recommend crunching the numbers in a spreadsheet. First of all, figure out the variables - 1) what could your house sell for, 2) how long can you expect it to take to sell, 3) what it could rent for, 4) what are your TRUE monthly costs of carrying it while you rent it, 5) how long do you intend to rent it before you sell it. You have already heard that a local Realtor can help you figure out the answers to 1) and 2). Craigslist.com is a great place to determine rent. Pretend you want to rent a house like yours. Go to Craigslist.com and input the criteria for your type of house in Seward Park. See what your competition is charging.

To figure out your TRUE monthly carrying costs, take into account not only your 1) mortgage principal and 2) interest, but 3) insurance (now for an investment property, not owner occupied - check with your ins. agent for the new rate), 4) property taxes, 5) utilities (who will pay them - you or the renter?) and 6) all maintenance. Don't forget that you lose the tax deductibility of your interest.

Then it's time to run the numbers. Figure out what your net gain or loss would be for each month. Take the monthly rental income and deduct the TOTAL monthly costs of carrying the property. If the amount is positive, you still need to decide if you WANT to be a Landlord. The previous posts give good information on being a landlord. If the result is a monthly loss, multiply the monthly loss by the number of months you intend to rent it out. Quantify which loss would be greater - selling or renting.

Good luck!

Fri May 23 2008, 22:38

Donita is right, get a CMA and find out what it could sell for. (that's SELL price, not LIST price). Then crunch your numbers and compare options. Yes, you might even lose on the sale, but the idea is to get the other guy to lose more on the house you're purchasing.

Fri May 23 2008, 10:21

I would definitely have a realtor give you a price opinion before you decide. It might be wise to try it at the higher price for a month or two, if it doesn't, then rent it out. $550 sounds really low for the Seward Park area but I guess it depends on how close it is to Rainier.

Thu May 22 2008, 22:31

Hi Jocelyn
As a landlord in Seattle, I would highly recommend reconsidering renting it out. Seattle is soooo renter biased, that it is impossible and/or verrrry expensive to get rid of a bad tenant.
Also, it just takes one bad tenant to trash a house. If you are becoming a landlord begrudingly, you'll not like it.

That being said, I have a Tudor in Fauntleroy across from the Ferry Docks and Lincoln Park for sale. It's a nice safe location and if you are moving to West Seattle, you might be interested in it. It's not currently listed in the MLS

Send me an email if you have an interest.

Sun May 11 2008, 12:50

Rent it if you can until this market picks up!

Sun May 11 2008, 12:16

Jocelyn,

I'd recommend having a Realtor provide you with a market anaylsis. If it looks like 580K is not possible perhaps you should rent it for 12 months and then revisit the selling option.
Best of luck!

Sat Mar 15 2008, 14:22

Hi Jocelyn;
Seattle's rental market is strong right now and you may be able to cover your mortgage amount. Does the $2400 include taxes and insurance? When you mention "rough appraisal" is that something that a local Realtor gave you? I would suggest getting two complete market analysis's from real estate agents familiar with your neighborhood and ask for suggestions as to how to they would maximize your home's value.

The other question you may want to ask yourself is do you have the time and interest to be a landlord? The Rental Housing Association of Seattle provides very good information for 1st time landlords and has rental forms on line for your use.
If you have any more questions, please feel free to email me.
Thanks,
Kris

Thu Feb 28 2008, 22:17

The market in many parts of Seattle remains strong. If you check with John L. Scott agent, they can provide you with a Trend report that will show the data in your particular portion of the market - sold prices, inventories, days on market, etc. This information should provide you with the tools you need to make a good decision.

Thu Feb 28 2008, 18:58

It is not likely that the rental will cover the full mortgage payment. If you have an adjustable mortgage, that difference could spread wider over time.

You generally have to bring the money to closing, not make up the difference "thru financing". So if you do not have the ability to close, then plan on renting it for as long as five years or more. If the market is not good now, it may be worse in a year or two or possibly five. So if you rent it, be prepared for a long hold.

Sat Feb 23 2008, 18:46