With the housing market still deteriorating, some stymied house sellers have stopped holding out for a sale and are veering down a different path — becoming a landlord.
Renting a house is an option for sellers who are forced to move because of a job transfer or other life circumstances, but it shouldn’t be taken lightly, experts say.
Would-be landlords may get more than they bargained for.
The rental industry is highly regulated with federal, state and city governments all having varied, often extremely detailed rules, said Janet Portman, co-author of Every Landlord’s Legal Guide.
“You can’t just sit back and collect rent,” Portman said. “You’re in for a steep learning curve, and you could easily get into huge trouble.”
The federal Fair Housing Act, which bans discriminatory housing practices, is one major law landlords must understand, she said. It dictates everything from the questions a landlord can ask a potential renter to the advertisements he puts in the newspaper.
A landlord couldn’t have an ad that says a property is ideal for a “mature couple” because it insinuates that they don’t want families with children, Portman said.
Many times, regular homeowners who accidentally get into the rental business “just can’t believe that because they own it, they can’t do what they want,” she added. They can’t come over to the house and check on things any time they want because tenants have privacy rights.
In Arizona, landlords should be familiar with the Residential Landlord and Tenant Act, as well as the Slumlord Act, said Debbie Norton, a local real estate agent who specializes in property management.
Renting out a home also has financial implications.
Homeowners often won’t be able to command a high enough rent to cover the entire monthly mortgage payment, Norton said. A recent client of Norton’s had a roughly $2,400 mortgage payment but could only get $1,450 in rent.
Upkeep on a rental property is also costly.
You have to pay for water, electricity, landscaping and repairs even if the house is vacant, Norton said. It could cost $3,000 to $5,000 just to fix an air conditioner, she said.
Hiring a professional property manager can cost about 10 percent of the monthly rent but can bring needed relief when it comes to the maintenance hassle, she said.
Property management firms also run credit and criminal background checks, review job histories and call landlords at former residences to check for evictions or other problems.
Securing a home warranty company’s services can also be a good idea, so people won’t be constantly calling, said Scott Teerink, owner of FirstStep Investments.
“It helps put the property on autopilot,” Teerink said.
Teerink added that landlords shouldn’t become friends with tenants and should be fair, but stick firmly to any guidelines they’ve set.
“They have a tendency to let the residents control them, and if you don’t stop them relatively quickly, they’re going to walk all over you,” he said.
Before heading down the landlord path, however, homeowners should consider options, East Valley real estate agent Jay Thompson said.
If a rental is leased out, the tenant gets to stay through the end of the lease term, which may make a sale impossible, Thompson said. Many people are also turned off by rental properties, so it may limit the buyer pool to investors, he said. “It’s a lot harder to sell a house with a tenant in it,” he said.