Feb. 2, 2023
Moving to a new place comes with many questions about the old place. What will you do with your old home? Would you sell it immediately, taking advantage of the increasing home prices? Or would you rent it short-term - allowing you to get more out of it before you sell it?
This "short-term rental" method is akin to renting a hotel room and has become a much-favored investment over the past decade. 28% of homeowners resort to taking this approach of renting their old home for a short term as a way to generate additional income.
While short-term rental is tempting, implementing it comes with more responsibilities, you may be willing to take on.
Read on to learn about the challenges you will likely face if you rent your home instead of selling it right away.
Challenge 1 - Short-Term Rental is a Heavy Responsibility
Renting your home isn't only about letting go of it and putting it on the listing; you must undertake many responsibilities.
When adding your home to the rental listings online, it is important to review the listing requirements, for it varies depending on the listing websites.
Bankrate recently wrote an article about this fact, explaining the responsibility one needs to take on. The post notes that you must consider the following before listing.
Are you capable of doing the repairs?
All rentees expect the renters to provide all the requisite repair facilities. And if you can't do so yourself, you must have a network of contractors to perform the repairs.
Screening the tenants
The world has now become dangerous. Trust is at an all-time low, in light of which you need to have a system in place to assess your tenants.
There are other responsibilities to take care of, like fielding issues and more. As a renter, you must decide whether you are ready to take on the duties of the landlord - which may mean either handling things yourself or with the help of a third party.
These responsibilities take away not only a huge chunk of your time but also your money. So, even if you rent a property, you might find yourself paying for the repairs, which may offset your income by a large degree.
And even then, you might face challenges from these guests. At best, they might turn out to be rude, attracting complaints from neighbors. And at worst, you might find yourself dealing with theft and regulatory violation.
These are just the most basic challenges - you may face more complex ones over time. If you are not ready to deal with these situations, selling your home might be a wiser option.
Challenge 2 - Your House May Not Be Fit For Renting
Not every house is worth renting. As harsh as this statement is - it is the truth. Factors like location, structure, neighborhood, etc., all play a huge role in whether your home is "rentable properly". Also, the less likely your house is located in a place with the potential to be a travel destination, the more likely you will receive no interest from renters.
An article by the National Association of Realtors puts this factor more bluntly.
"When it comes to the viability of profitable STRs….consider factors like location, amenities, and whether the property is appealing. Most people seek STRs in locations where they vacation, so proximity to attractions is important. Likewise, the property should cater to a variety of travelers."
Nuance factors like "travel-destination-like-appeal" never pop into most homeowners' minds, but they are important things to consider.
Therefore, before renting, do your homework. Assess how much rental goes for in your area and how much income it can generate on a yearly basis. Fixing your home beforehand is also a great idea if you don't want to offset your earnings by paying for repairs.
Do not take the decision to rent your home lightly. Weigh all your alternatives first, and to help you make a decision, consult with your local real estate advisor.