You`re moving. The papers are signed. The boxes are packed. There`s just one hitch: Your old place hasn`t sold yet.
In this market, if you can sell your home at all, you`ll likely take a loss.
Should you rent it out until the economy picks up?
Only if you`re desperate and aware of the perils, some experts say.
”The most important factor is the very significant risk of losing money because some renters skip town, and it`s rarely worth the time and effort to go after them,” says real-estate lawyer Simon Wynn. As the economy worsens, that danger increases. Wynn relates a recent case where a client had to sue her own brother to recoup back rent.
But at a time when many homes sit on the market for close to a year, and Manhattan co-ops sometimes take twice that long to sell, renting may be the only option.
If that`s the case, take steps to safeguard your investment.
Careful screening of prospective tenants is essential, but how do you find the tenant in the first place? List your home with real-estate brokers, or put an ad in the paper yourself.
”I advise starting with a broker on an exclusive basis,” says Joann Coviello, vice president of ETC Management, a building-management firm. ”Give them a standard 90-day exclusive and they`ll be more motivated to bring in tenants. If you try to do it yourself, you`ll have to be available to take phone calls, show the unit and screen the tenants.”
The broker`s fee can range from one month`s rent to 15 percent of a year`s rent. The broker should also do a credit check, which will cost the landlord anywhere from $25 to $100.
If you live in a co-op or condo, first check the building`s bylaws.
”Each building has a different set of rules,” notes Coviello.
Under federal law, you cannot discriminate on grounds of race, creed, color, national origin, sex or age, says Wynn. In addition, in New York, you cannot discriminate against people with children or on the basis of sexual preference. You can say no to people with pets.
If you have time to do the legwork yourself, you`ll save money, says Bradley Reetz, president of the Westchester Apartment Owners Council.
Reetz, who teaches a Saturday seminar at New York University`s School of Continuing Education entitled ”Renting Out Your Home (When It Isn`t Selling),” suggests asking applicants for the following:
– Social Security number.
– Two pay stubs, a W-2 form showing last year`s earnings or a copy of their last tax return.
– Savings and checking account numbers.
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– A copy of their most recent utility and phone bills. Get the account numbers from the bills and check with utility and phone companies, suggests Reetz.
”Explain that the customer is a prospective tenant and you want to find out if they pay their bills promptly. You`ll need the tenant`s permission, but if they refuse, it may mean they are trying to hide something, and alarms should go off,” says Reetz.
Check present and past residences, as well, he continues, asking former landlords if there were any problems.
You should also talk with a person`s supervisor at work to see whether the employee is prompt and dependable and whether there are any problems.
The Registry, a national tenant-screening agency headquartered in Rockville, Md., can cut through some of the paperwork when evaluating a prospective tenant. For $25, it will do a consumer credit check, accessing the files of two national credit bureaus, and a registry check, scanning court records in most metropolitan areas for tenants who have failed to pay rent in the past.
After all the checking is done, the final decision is usually based on a personal interview. ”You have to rely on your gut feeling,” says ETC`s Coviello. ”Ask yourself if they seem like people who would care for the place and be responsible.”