The Chicago Tribune ran an article yesterday on Renting What You Can't Sell - or becoming an unintentional landlord. The article seemed fairly well balanced, despite quoting several realtors that you always have to wonder about having their own agenda in such matters. I get asked this question a lot - "should we just rent the place out" - and I always have to be careful that I don't come across as pushing my own agenda - i.e. getting them to sell so that I earn a bigger commission.
So here is what I usually tell them so that they can make the decision on their own. First, you have to consider if you really want to be a landlord, with all it's headaches. You can just imagine the problems of finding tenants, dealing with vacancies, collecting rent, having tenants that trash the place, and getting calls at odd hours to repair problems. Even if the tenants don't trash your home, in two years it will not look as good as it does now and it certainly won't show very well if the tenants are still living there.
Second, almost invariably the rent you collect will not cover your out of pocket costs. That's just the reality of the Chicago rental market. For some reason Chicago is full of wannabe landlords and that brings down rents. So then the question becomes: What better use do you have for your money? What will you be able to sell your home for down the road and how much money will you lose in the meantime?
For many sellers the answer to these questions comes down to their outlook for the real estate market and their personal financial situation. Many people expect the real estate market to have a V-shaped recovery - i.e. they can sell in 1 - 2 years for 10% or more than they can sell today. Personally, I think that's a bit of a gamble. Yes, Chicago home prices are well below the trendline right now but historically home prices have only appreciated at 3.7% per year here.
Then there is the question of whether or not a seller can even afford to sell right now. Many, many sellers, who either can't or don't want to pursue a short sale, are looking at having to write a substantial check at closing. If, they simply don't have the money then losing a few hundred dollars per month is like paying interest on the money you would have to borrow to sell your house - and it is the only option available. For instance, losing $300 per month instead of writing a check for $50,000 that you don't have is like borrowing that $50,000 at 7.2%.
In the end, the decision to sell or rent involves a lot of personal factors that a real estate agent can't and probably shouldn't advise you on. It's best to just get your agent's thoughts on the rental market and what you can realistically sell your home for and seek the advice of an accountant or some other financial adviser that doesn't have a vested interest in your decision.