Some sellers sold on renting

By Marilyn Kennedy Melia CTW Features

Many homeowners who want to move are reluctant to sell since they can no longer command the sale prices their neighbors enjoyed during the recent era of three and four percent mortgage rates.

But some would-be home sellers who are relatively well-heeled and also hold a low-rate mortgage are crunching numbers and taking a new path to buying a new place: Renting their former home instead of selling.

Experts at John Burns Real Estate Consulting, which advises home builders, wondered whether with the many homeowners who pay less in monthly mortgage than they could command in rent, and with the strong demand for suburban single-family rental homes, if owners would rent rather than sell. From a survey in late summer, they found that a significant portion of owners were doing just that – especially in regions with strong home rental demand, like the West and South.

Landlord lessons

But renting can be a difficult way to make money, points out

Scott Bishop, financial planner at Avidian Wealth, Houston, who points to dealing with delayed rental payments, and attending to needed repairs as some of the hassles. Moreover, novice landlords might be ill-informed about demand and rental rates, Bishop says. He suggests talking to local real estate agents to discern local rental realities.

Money matters

Usually, homebuyers use the sale profits from their former home to make a down payment on their next one. By not selling, these buyers must dig into their savings instead.

Although mortgages are available with a down payment less than the standard twenty percent of a home’s purchase price, “If you cannot afford to either pay twenty percent down or afford a 15-year mortgage (which has higher monthly costs than a 30-year loan), you may not be really able to afford the home,” believes Bishop.

Moreover, he says landlords need to be able to cover expenses on their property when a tenant can’t be found.

Still, it can be a workable, with John Burns Real Estate Consulting finding that as many as ten percent of sellers in housing supply constrained Southern California taking this tack.