To Sell, Rent, Or Rent-to-Own?

Question

Hello all.  I currently own my home, and have accepted a new job out of state and will be moving in 3 weeks.

The house will need a small amount of work before being move-in-ready: some patch-up work after a kitchen renovation and some HVAC updates.

I plan on making those renovations in the near term and then either selling or or renting.  I can make the mortgage payment in addition to my rent payment living outside of state, but it will be tight.  Someone suggested rent-to-own as a way to sell with relieving the mortgage burden.

I'm sure you need more information to help me out.  Let me know what more you need, and I appreciate your input.  Thank you.

Account Closed · Answer

Hey Jim: I specialize in Lease Options for the last 20 years and I work with people in the exact same situation as you on a daily basis. I highly recommend a lease option over a rental situation for many reasons but the number one reason is the quailty of the tenant/buyer will be far superior to a regular tenant. The tenant/buyer has a financial interest in the property so they tend to pay on time, care for the house, make repairs when needed and it is very rare in my experience that they do any harm to the property. 
Best,
Joe

Michael B. · Answer

Don't think about it. Sell it.

Long distance landlording has a tenancy to end badly, especially when you don't have sufficient reserves (which it sounds like you don't). You won't be able to check on the property, and understanding maintenance problems can be tough.

Fix it up and then give it to a Realtor. Cut the ties and move to your new location with a clean slate.

James H. · Answer

I would just sell it. I would not want to hire a property manager nor manage from out of state. I don't personally like the rent-to-own scheme for various reasons. The main reason being that rent-to-own is basically seller financing with a "gotcha" clause that allows you to take advantage of the buyer. Seller financing is not ideal either as I would not want to forclose from out of state.

Keith Barton · Answer

You need to think long and hard about being a landlord if you've never been one before. It is not for everyone. However, if you decide to rent it out - being out of state can make things more challenging. Is there anyone in the area that can keep an eye on things? Also, a lease-option (aka rent to own) deal probably would be to your benefit:

1) The lease term is usually longer than a standard one year lease;
2) The option price (what many people call the security deposit - but which cannot actually be a security deposit) is not refundable;
3) You should make the tenants pay for all maintenance and repairs below a certain amount (say $500) - after all, they are trying to make the home theirs. This gives them a different approach and they take care of the property better;
4) If they don't get financed in the option period (which is common) you can extend it with another option payment and they continue to lease under the same terms - long term tenants are better for you....

Lynn McGeein · Answer

Jim, there are too many factors involved to make any call on this.  We got one month's notice to move across the country for my husband's job, and we did rent out our residence when we moved, but that is because we already have income property so we have a decent comfort level and landlord experience and knew what to look for in property management (and even then it took a while to find a decent PM), and we had to make the decision basically at the bottom of the market 2 years ago.   It was more of an emotional decision as we love the house and weren't sure we were staying back on the east coast.  Now that we've been here a while and decided to stay, we will likely sell it when these tenants leave as it doesn't meet the criteria of our other rentals and the market has come back a bit.   If you are not experienced with renters, I would strongly consider selling, as one bad property manager or one bad tenant on a tight budget could hurt.  Also, if you are underwater in a non-recourse state, now is the time to consider that option as I believe it's for your primary residence, not if it's been converted to a rental?  As far as rent-to-own, I've never done it but I'm sure others can chime in.  I know there are rules about how much rent towards down payment, how long a lease before it's considered a change in ownership, etc.