Is Renting Your Property the Best Option for You?

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Posted by The Savvy Retiree on July 10, 2017 in Downsizing, Rightsizing, Save Money

Ryan Cole writing on renting your home…

One of our readers wrote to us ( with a question.

She was rightsizing her life, leaving behind a large house in a big city for a smaller, easier space and a simpler existence. The decision was a no-brainer…but it threw up a dilemma.

Should she rent out her house, or just sell it?

I’m in a unique position to answer that, since I’ve been dealing with the exact same question.

Of course, each individual situation will have unique opportunities and challenges. But I’m happy to use my experience as a guidepost.

In my case – and in most cases – as long as you’re in an area where extended vacancies aren’t a fear, it makes more financial sense to rent. Rental prices are almost always higher than mortgage payments – especially if you bought at least a few years back.

That means, as long as you’ve got a reliable line of renters and a big enough profit margin to cover repairs, you’ll be better off renting…all things being equal.

Of course, all things are never equal.

For some folk, dealing with renters isn’t worth the hassle. You can always get a management company – but that will just eat into your profit.

For some folk, dealing with repairs isn’t worth the hassle. Especially if you’re leaving the area altogether and you won’t be able to fix up every little problem yourself. It’s amazing how much money it can cost to clear a simple clogged toilet when you have to call a plumber each time.

Before you say anyone can unclog a toilet – you’d be surprised. Whether through ignorance or plain laziness, if you rent out long enough, you’ll have some annoying house calls to pay for.

But, most of all, some folks aren’t prepared for the bureaucracy that comes with renting out a home. Especially if you live in a larger town or city.

There can be enough red tape to sink you.

My house, for example, was built in 1924. Any house built before 1979 is likely to have lead paint in it – and ours is no exception.
There’s no lead paint exposed to the air, mind you – it’s all under paneling, wallpaper, or decades of fresh paint.

But that doesn’t matter to the bureaucracy. Well-intentioned rules about lead paint make dealing with it a nightmare.

Even covered, it’s a problem.

I’ll have to go through the house and repair every paint chip on every surface, no matter how small, in order to get certified.

I’ll have to get a lead inspection – at considerable expense. The lead inspector advises me to do a significant deep clean before he comes. “Clean yourself out the door, and wait on the porch. If you go back inside, you’re just going to track lead in,” he says, (which makes you wonder how effective all this protection is).

And, even if you get yourself certified, you’ll have to go through the whole process again each time you get a new tenant.

But that’s not the worst part. Thanks to a change in local law, I can be sued by anyone who lives in the house and later tests positive for lead, up to their 21st birthday.

They don’t have to show they got it in the house. They just have to show there’s lead paint somewhere in the bowels of the structure, and that they’ve got lead in their system. In fact, they can sue every spot they’ve ever lived in.

I should know – because the ambulance chasers are sending out postcards encouraging those lawsuits in my neighborhood right now.
Now, these laws aren’t the same everywhere. Plenty of places – especially smaller towns, or rural areas – will be more lenient. I’m talking about the sorts of places where a handshake still counts as a contract.

But these are the perils of renting out in the city.

Really these are the perils of dealing with the bureaucracy, wherever you are. Each rule and regulation had an original goal and a noble purpose. Usually, they came down in response to a legitimately worrying incident. (Look for plenty of new regulations related to lead piping, after the fiasco in Flint.)

But, as in most things, there are all sorts of trickle-down, unintended consequences.

In my case, it makes it about twice as expensive to get set up to rent out a place. There’s no protection against the constant threat of lawsuit, no matter how careful I am to cover up and seal in any potentially dangerous lead paint.

It’s little wonder that my hometown, Baltimore, has so many vacant homes. When it’s this difficult just to rent a place out, and when doing so leaves you this exposed to the courts, it often makes more sense to leave a spot empty instead of risking your entire net worth.

One day, we’ll just have to gut the house down to the studs. That’s the only way to get a completely clean bill of health. And I guess that’s probably the final point of all these regulations – to slowly but surely transfer every last remnant of lead paint into landfills.

But until then, it’s simply a theatrical performance – I’m not really accomplishing anything by jumping through these hoops…other than checking off a couple boxes on a government form.

So if you’re thinking of renting – or doing any sort of business – make sure you know the local rules first.

Because those rules can be a killer.

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