Just in the past month alone, I've spoken with several Orange County homeowners who are faced with this question:
Should I sell my home now or rent it out until the market gets better?
Given that we're in the fall and soon-to-be winter months, traditionally the real estate market slows down (though my experience in past years has been the opposite!). So if you're thinking about renting your home out for the time being, here are 5 things to consider:
1) Make sure you have all the proper paperwork ready to go. Craigslist and other free online ad services make it easy to advertise your home for lease. It's sifting through the applicants that is much more difficult. In order to gather the right information about a particular applicant, you'll need the appropriate forms to have filled out. Once you find a tenant, you'll need to have a solid lease agreement that protects you as the landlord. If you plan to lease your home out on your own, make sure you cover all your bases on that lease agreement, otherwise you may be in for a VERY bumpy ride in the coming months.
2) Be ready to respond to repair requests ASAP. As a landlord, you can't just take weekends off. If the toilet floods over at your property, you'll need to address it as soon as possible to prevent any further damage or potential lawsuits from your tenant for negligence. You may have to deal with it during dinnertime with your family, or while you're away on vacation. So just be prepared to be "on-call" for your tenant.
3) Prepare for late payments and possible eviction. Not all tenants feel the urgency to pay their rent on time. Some don't even bother paying rent after a while. Some may have their check bounce. It's up to you to either give them a break and accept their sob story about how their grandmother passed away last week and therefore didn't have enough money to pay their rent, or you have to take action and start the eviction process. How do you go about an eviction? That's a separate animal altogether. As a landlord myself, I've personally gone through the process. Not fun for anyone involved. In the meantime, you'll need to make sure your property isn't vandalized or neglected during the process, plus you'll need to have some money in reserve to pay for the eviction, maintenance, your mortgage, etc.
4) Watch out for HOA violations. If your home is part of a homeowners association (HOA), your tenants need to be aware of the HOA rules that apply to them, such as parking rules, BBQ rules, association pool and spa rules, satellite dish rules, etc. If they violate these rules, you may end up having to pay the violation fees up front and then try to recoup it from your tenant. And since you're not living there, you may not even know about the violation if your HOA doesn't deliver the notice to you via mail.
5) Protect yourself. When you sign a lease agreement as a landlord with a tenant and accept their deposit and allow them to take possession, you are under a binding legal contract. Any breach of contract can result in a legal dispute that may expose your personal assets and drain you and your family financially if you're not careful and protected. Many landlords look to LLC's or umbrella insurance policies to provide some protection. You'll need to find out what works best for you and have that all set up before entering into a contract with a tenant.
If you're ready to move forward as a landlord, as long as you keep these 5 things in mind and prepare yourself for what's to come, then renting your home out may be a good option for you. If this doesn't appeal to you whatsoever, perhaps selling your home may be the better option after all. Whichever way you go, it has to make sense to you financially, emotionally, and based on the timing that you have in mind.
For more information on leasing, selling, or buying a home in or around Orange County, feel free to contact me. (I also have my own personal stories to share about being both a landlord and homeowner if that would be helpful to you too).
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