Can’t Sell Your Home? Rent It Out and Earn

Posted by MoneySavvy on Jun 2nd, 2010 | no comments home title

In an effort to avoid foreclosure, some homeowners attempt to sell their homes so that they can pay off the mortgage. This is a viable option if you have sufficient equity in your home and can sell it for enough to cover what you owe. But with home values on the decline, there’s a good chance that you won’t be able to do that.

When they find out that they won’t be able to solve their problems by selling their homes, many homeowners just give up and let the foreclosure take its course. But that’s not necessarily the only solution. You may be able to rent your home out and earn the money you need to make your mortgage payments.

If this option interests you, there are a few things you’ll need to consider:

Where will you live while you’re renting out your home? Can you stay with family or rent a less expensive place? If you have nowhere else to go, could you rent out your basement or garage apartment and stay in your home?

Will you be able to make enough money by renting out your home to cover your mortgage and other expenses? If you can’t, will you be able to make up the difference?

Are there any zoning or homeowners’ association restrictions that would prevent you from renting out your home? Make sure you know the law and rules before you put your home up for rent.

Do rentals in your neighborhood tend to do well? If not, you might have a hard time finding a renter, or at least one that will pay as much rent as you require.

Does your home need any repairs? As a landlord, you will be required to keep the house in good shape. And if you’re having financial problems, that might be difficult to do, especially if the rent money barely covers the mortgage.

What will you do if the renter doesn’t pay the rent? You need to have a backup plan in case your renter flakes out on you. Otherwise you could end up facing foreclosure again.

Will you be able to eventually return to your home? If so, you’ll need to draw up a lease that will make it as easy as possible for you to do so. Making it a 6-month or month-to-month lease will leave the door open for you to move back in quickly if your situation improves.

Renting out your home might not be an ideal solution. But if doing so could save your home, it’s certainly worth considering. You’ll be able to avoid further damage to your credit and keep the home in your name.