The Pro and Cons of Listing for Sale and Rent at Once

 

By Diane Saatchi

Summer 2018 rental security deposits may still be pending, but homeowners are already looking to the 2019 season and pondering the annual question: rent or sell?

Many answer that question with another: Why not try both? List the property for rent or sale and decide what to do if/when there is an offer.

It sounds like a win-win, but I can offer five reasons why it may not be all that it seems — and one reason why it is worth consideration.

1) The first reason they won’t want to go this route is perhaps the most persuasive: Putting a home for sale and for rent at the same time may be a drag on both goals.

Let me explain.

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When you tell a broker you’re planning to list a property for sale that’s either for rent or currently occupied by a tenant, please forgive them if their eyes don’t light up with joy. It is harder to show a house for sale that is rented, and it is harder to rent a house that is listed for sale.

Sellers might not realize that they tend to be much easier to work with than tenants. Sellers own the house. They want to sell the house. They’re invested in that transaction happening, and they’re willing to inconvenience themselves to help it along — they tend to be more willing to accommodate a broker’s (and therefore a buyer’s) schedule, leaving for a few hours when they know a potential buyer is coming by, and keeping the place ship-shape.

Tenants, although they may mean well, just aren’t as invested.

If they know the house is for sale, they may promise to make it easy to show, to accommodate the broker, to keep it spotless. But the reality of everyday life intrudes, making it hard for the broker to find time to show the house. If brokers have other listings without tenants, they might put more of their energy toward those listings until this one is vacant, because it’s hard to show the house. Tenants are not likely to allow open houses during the rental term in the summer, which is also when open houses attract the most visitors.

Plus — and sellers may not like to hear this — putting a house up for rent and for sale at the same time isn’t the win-win it sounds like: rental income while the house is waiting to be sold, and then it’s off your hands once it’s empty! In reality, tenants tend to be savvy and to know that renting a house listed for sale means inconvenience for them. If there’s another, comparable home for rent they’re considering that isn’t up for sale, they’ll most likely prefer to go with that one. Or, they may want a significant discount on the rent if they promise to be good sports about the inconveniences.

So now we have brokers who are avoiding showing the house, and tenants who are reluctant to rent. All of a sudden, putting the house up for rent and for sale at the same time has put a drag on the house in both arenas.

2) The second reason is that if you decide to rent for the summer, you may have to commit to the rental in January or February.

Clearly, you can’t sell it before the summer, and it’s going to be hard to show during the rental term. So, if you want to rent out a house that’s for sale, count on owning it for another full year. You might be able to sell it within the year, but it’s unlikely.

3) The third reason against listing for both is that prepping a house for rent is different than it is for sale.

When staging for sale, a house needs to look as attractive as possible. But, for rent, it has to be both attractive and functional. Ever notice in a model home that the flat screen TVs are cardboard, and the cabinets are empty? Sellers can get away with the shortcuts landlords cannot. And while you may not care that the ice maker is very noisy, or the pool heater is not quite what it used to be, your tenants will.

It takes more effort to maintain a house you hope to rent than a house you live in — while you might not care about the chipped cabinets and threadbare towels (not to mention the purple walls your daughter chose for her bedroom), you can bet potential renters will pick up on it. Buyers tend not to be so sensitive to these things, because they expect to do some work no matter the condition of the house, to make it suit their tastes. Likewise, buyers don’t care about out-of-style décor, mismatched placemats, and your family portraits.

4) Still with me? There is a fourth reason. The rental market is not what it used to be.

More municipalities enacted rental laws, others are better at enforcement than they had been, and more and more tenants are favoring shorter terms. See the blog I wrote about the changing rental market a few years ago, and note it’s evolved further since then. It’s possible that the cost and efforts to prepare for rent won’t pay off.

5) And lastly, I tell homeowners that the rent/sell decision depends on their needs.

If they’re ready to decamp to Florida and aren’t interested in making the changes the house needs to be a good rental, they might just want to list it for sale and forget about renting. If they’re trying to buy themselves a year to get into a better market for home sales, they’ll want to take into account the cost of the changes a rental requires, the work, the carry costs and the risks — they might net more in the end if they skip the updates and sell it for less right now.

There is one advantage to listing for both rent and sale: More eyes will see it. If you want to sell your home, more traffic is always a good thing. It’s a long shot, but maybe someone who looks at it for rent will fall in love and want to purchase, or know someone who will.

I’m not saying that you should definitely not list your home for sale and for rent at the same time, but I am saying that if that’s the plan, there is much to consider and much to do.



© 2018 Diane Saatchi