With the continued rising costs of rents in many Chicago neighborhood markets and suburban areas many are considering renting their homes in lieu of selling or adding to their real estate investment portfolio.
Although this can be both a profitable and logically way to take advantage of both the rental markets while waiting for a different time to sell, there are things to consider.
1. Will delayed or missed rental payments impact your ability to pay off the mortgage? This can likely occur during holidays, start of the school year or during summer when vacation travels peak. Furthermore, the economy has placed many homeowners in a situation where they are unable to pay their mortgage payments; How many individuals are in similar situations but faced with a rental payment instead?
2. Are you prepared to take possible foreclosure action if necessary?
3. Have you adjusted for added costs related to landlording? Such as changes in insurance costs, potential property management costs, repairs and broker fees?
4. How will repairs and emergencies be addressed?
5. How long will you rent for? Many individuals need the equity in their home (or release of a mortgage) in order to purchase their next home.
6. Some markets have extremely low inventory, will delaying a home sale by a year be beneficial?
7. Are there any rental restrictions in the HOA?
8. What is the current owner occupancy in your association? Low percentages of owner occupied units can hinder the ability for new buyers to purchase. This can result in property values falling, higher market times and lower pool of qualified buyers.
As a landlord, renting your investment can be a great opportunity to leverage your assets, but the process isn’t as simple as collecting rental payments and counting the income month to month. Understanding your return can help you focus your attention to better performing assets with lower potential risk.
