subject: Can't Sell Your Property? Rent It Out! [print this page] Between high unemployment rates, high foreclosure rates, low job security, and unstable financial markets, there are few buyers to speak of in the real estate market, and hordes of would-be sellers trying to escape from under the thumb of their mortgages. Basically, it's a terrible time to try and sell real estate, and most markets have dropped anywhere from 5-50% in average home value. But what if you need to move? What can you do?
One option many sellers haven't seriously considered is signing a rental agreement on their property, and letting a tenant pay down their mortgage over the course of the next few years, while the real estate market (and general economy) recovers. Sure, becoming a landlord might seem like a frightening commitment, but the overwhelming majority of the work of being a landlord merely involves screening tenants, and signing an airtight rental agreement with the right tenant. Here's the "landlording for dummies" version of how to proceed, to rebuild the equity in your real estate while simultaneously paying down your mortgage.
The first step is advertising your rental property as available, and holding open houses to show the property to rental applicants. In most cases, a combination of online (rent.com, Craigslist.org, etc) and offline (local daily and weekly news publications, housing authority listings, etc) will do the trick quite easily, if your property is in good shape and is reasonably priced.
Schedule an open house or two, during which your potential tenants can come by, take a look at the property, have a free brownie (hint: bake them on site right before the open house), and fill out a rental application. When interested applicants turn in their rental application, require a rental application fee (standard is $15-25), to pay for credit checks (and to screen out the non-serious applicants). After the open house, go online and pull the credit reports for each tenant who submitted a rental application, verify their income through their employer, and review how stable their housing and job histories have been.
After you've found a promising tenant, call them to give them the good news, and arrange a time to meet and sign a rental agreement, exchange keys, and collect the security deposit and first month's rent. You will, however, need to create a rental agreement package that complies with your state's landlord-tenant laws. Because the laws are different in your state, be sure to find a rental agreement package that not only includes state-specific language and state-specific disclosures (e.g. many states require lead paint disclosures), but also information regarding state caps on what you can charge for security deposits, late fees, etc. These can often be found online; one such resource is EZ Landlord Forms (http://www.ezlandlordforms.com).
The importance of a legally-compliant, and strenuously protective, rental agreement can't be hyperbolized; as disputes are raised between you and your tenants, the rental agreement package is the first document referenced. If your tenants stop paying their rent, or violate the terms of the rental agreement in other ways, and you file for eviction in rent court, the judge can postpone eviction and even fine you if your rental agreement fails to comply with state or federal law.
Not everyone who purchases real estate is interested in becoming a landlord, but many find themselves preferring to rent and wait out the challenging real estate market, to sell in richer times. By remaining flexible, you can wait out this brutally difficult economy, and even create additional wealth in the meantime. Good luck with selling or renting your real estate, and for additional reading and rental agreement resources see the Resource Box below.
