Haus Schwatz: Cati's DC Real Estate


Renting Out or Losing Out? Help!!

"Well," said the seller when she called me back, "I think I changed my mind.  I have decided to move away, but rather than selling, I'd rent out my house for a year or two."  In her new town, she could rent something for herself, and when she was ready to buy again, she'd just sell the DC property then.  Also, in case she wanted to come back, she might otherwise not be able to afford a house in this hot neighborhood.

Of course, we all have heard this idea a lot more often from potential sellers in recent years.  The fear of selling at the bottom is real, even though it's not objectively a problem for a longer-time owner who has built good equity.   (Another easily neglected part of the equation is the fact that they would be buying at the bottom as well.)

But each case is different.  Help me out here; I'm struggling for the right answer.  If there is indeed a good chance she'll move back here soon, it might make sense to hold onto the home and save the cost of selling, right?  But she did not want to stay in the house, even if she had stayed in DC-she wanted to trade the urban experience for a more serene suburban setting.  I always understand emotional attachment, but she says she doesn't have any particular attachment to her current place.

Now, I can think of many reasons that the idea of renting out seems a crazy thing to do for her.  "Did you do the math on what it would mean for your cash flow," I asked?  How would the potential rental income offset her mortgage, taxes and insurance?  What would it mean for her to pay rent in addition?  Had she looked into the cost of property management?  The tear and wear that would be caused by tenants?  Or at the tough DC rental laws that might make it very hard for the landlord to sell or to get unwilling or bad tenants out?

No, she hadn't.

Or other than those issues with becoming a landlady, had she considered what it would mean it if interest rates had gone up considerably by the time she wanted to sell?  What the market would do after the big temporary tax credit and other government stimuli will have ended?

No, she hadn't, either.  But maybe I could help her figure things out?

As I'm trying not to be biased, I'll pass this on to my fellow Rainers.  Any input, comparison charts, experiences or whatever that could help someone do the math on this issues will be much appreciated.

© 2012, Catarina Bannier


Comment balloon 6 commentsCatarina Bannier • January 08 2010 02:28PM
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