Renting your home while it's for sale offers advantages

SMART MOVES

April 04, 1993|By ELLEN JAMES MARTIN

They were two law professors in their 30s who had taken new jobs in Pennsylvania before their Tudor-style home in Silver Spring sold. And, frankly, they couldn't afford to make two house payments at once.

So the couple reluctantly embarked on an adventure known as "rent while you sell." Through word of mouth, they found another couple who happened to need a three-month rental. And, by the time the tenants were ready to move, their Tudor house had sold.

"They were lucky, lucky, lucky," observes Sally Hulbert, the Coldwell Banker agent who sold the law professors' home.

Renting while you try to sell is always a gamble, real estate specialists emphasize.

"It's a tough sale, because tenants don't take care of a property like the owner does, and they have no incentive to show the house," says Lynn Creager, who sells real estate through the Phoenix-Hunt Valley office of Coldwell Banker.

Gamble that it is, however, there are significant advantages to renting while you sell. Obviously, the tenants will give you a financial assist with your carrying costs until you find the right buyer.

Helpful tenants will also assist in keeping a property in good repair. They'll alert the owner at once if the roof starts to leak or the water heater bursts. In addition, tenants with attractive furnishings will make a house look cozier and more presentable than a vacant house would look to prospective buyers.

"An empty house is a turnoff to many buyers. You're better off with a nicely decorated house that doesn't have a lot of junk and personal stuff in it," says Ruth Rejnis, a real estate author and former New York Times reporter. On the other hand, "an empty house is going to look a lot better than a dirty, cluttered house," she says.

*

If you plan to rent and sell simultaneously, here are 10 suggestions that could prove valuable:

* No. 1: Be honest with your tenants from the outset.

"It goes back to the 'golden rule.' If you treat everybody fairly, you're going to get it back," says Therese Redmond, sales manager at Century 21-Diana Realty in Bel Air.

If you're going to be marketing your home during the rental, you need to be candid about the fact that buyers will be coming through. You also need to jointly set ground rules on showings.

"If the tenant says he wants 24 hours' notice of a showing, then you should respect his wishes," Ms. Redmond says.

* No. 2: Offer to sell to your tenants first.

It's only common decency -- and in some places, local law requires it. What's not necessary is that you cut the price for your tenants.

* No. 3: Consider short-term tenants who are between homes.

It's customary for a landlord to consider nothing short of a full-year lease. They figure: Why fool with someone who is in-and-out?

But short-term tenants can be excellent tenants who simply need bridge housing until their next property is built or ready. As past homeowners, short-termers can empathize with the need to keep a property in good shape for sale. And, given the dearth of flexible rentals on the market, short-termers will often pay

premium rent.

Ms. Hulbert, who sells houses in the Bethesda area, suggests that the core lease on your for-sale home be for three months, after which it would go on a month-to-month basis. That way, either party can opt out at short notice. Even with flexibility, though, don't expect your timing to be perfect.

* No. 4: Try for a military family as tenants. "Military people tend to be very well trained, very disciplined. And they're accustomed to moving often," Ms. Hulbert notes. Also, if a military family wrongs its landlord and leaves, it can be traced with relative ease, she points out.

* No. 5: Attempt to learn what you can about your tenants' financial situation before they move in.

You don't have to hire a real estate company to approach your rental like a professional. Standard lease forms may be had from a local housing organization, such as Baltimore Neighborhoods Inc., in Baltimore, or possibly from a stationery store.

How to discover a prospective tenants' credit background without being a bona fide business? Ask them to obtain their own credit reports through such a big reporting agency as TRW. Or ask for the names and numbers of past landlords, if any.

* No. 6: Don't assume that all tenants with high incomes or fancy jobs will be good ones. It's predictive that you'll get your rent on time from tenants with a good credit history. But a doctor with a six-figure income isn't necessarily the one who will make your home a tidy showplace.

"Some people with perfect credentials and high incomes turn out to be terrible tenants," Ms. Hulbert says.

What are clues to a tidy tenant? Everyone in the rental business has his own theory. Some say you should meet a rental prospect at his current home to see how he keeps it. Others advise you to check out the interior of his car. Still others would have you subtly study the condition of his fingernails.

* No. 7: Don't advertise your rented home as a "handyman special."

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