We moved (and we are renting in our new town halfway across the country). Our house isn’t sold yet and the “summer season” in a university town is coming to an end. We’d like to be buying a new house in our new town in the winter/spring.
In the meantime, we are pondering whether we should try to rent the old house or not. The cost of the house (interest on the mortgage, taxes, insurance, utilities and lawn care) ~= $9000 to hold for a year. We think we could rent for a little less than our total mortgage + escrow payment. What other issues am I missing as I think about pros/cons? How would you set up the “math problem” for this decision?
Ugh– not a fun situation to be in. I hope someone sweeps in this August so you don’t have to make the rental decision.
The main thing to think about:
How much do you hate hassle? vs. How much do you need/want the 9K/year?
All of my sub-thinkings are basically in the form of how to deal with the hassle should you decide to rent.
- Are there any good managerial companies in the area that you trust to take care of things for you?
- How would you react if the tenants trash the place or fail to pay?
- What are the eviction laws in your old place?
- Who can you rent to– anybody or just single families?
- Are you thinking of doing a short-term or long-term rental? (If it’s short-term, then, since you’re moving from a university town, you may be able to use sabbatical homes or your local university website to rent out to a temporary academic).
You may also want to think about how much you would be willing to lower your house price. Staging it may also be worth some effort.
Here’s a Washington post article on the “math”— it goes into all the literal costs of renting. Note especially what it says about capital gains taxes if you’ve lived in the place 2 out of 5 of the previous years. Though this cbs news article talks about the tax advantages to rental depreciation. This blogpost has a few more things to consider.
I guess you could set up a math problem with expected probability and expected utility, but you don’t actually know what the probabilities are. It would probably be some dynamic model where you have some probability of selling each month and that right-hand-side would have to collapse to being less than 9000 for you to not rent it out. Probably too complicated to actually be practical.
Grumpy Nation– Can you be more help to Amanda? How would you make this decision? What would you consider? Any stories about renting/selling/etc.?