"You've Caught the NET!"

More and more, as the Chicago Real Estate Market continues at a comparatively sluggish pace, several of our seller clients are considering renting their existing homes - rather than risking vacancy, or becoming more frustrated, in their opinion, continuing to try to sell them.

For some, not inclined or with the experience or mentality to be landlords, the answer is pretty clear cut - reduce your price to sell, and MOVE ON!

But for some of the others, renting is a good option for them.  It's a good option, however, only if they understand the following-

1.  Stable tenants require leases - at least one year, perhaps longer - and they have to commit to renting for at least that time, and hope the sales market improves afterward.

2.  Shorter-term rental, or house sitters agreeing to keep the house staged and in best showing shape while the house continues to be marketed, is an alternative to long-term leasing - but this service is not without cost.  However, for many, it may be attractive, especially if they don't want to have a longer term tenant.

SitterCity.com shows over 6,000 folks, with varying degrees of experience and availability, willing to sit houses in Chicago, for varying amounts of time.

3.  Often times, renting will result in negative cash flow, especially if a seller is highly leveraged, and has high taxes and homeowner assessments.  This negative can be several hundred dollars, or more.  Better than a vacant property, but sometimes less than deep discounting to sell.  Can the seller handle the negative each month?

4.  Renting for more than three years could make the seller fail the Principal Residence Test by the IRS, and they will have to pay long-term capital gains and cost recovery as if the property were always an investment.  Of course, have them check with their Accountant on this one for exact interpretation.

5.  The amount of Gross Rent is TAXABLE INCOME, although it is reduced to net by subtracting interest paid, maintenance and homeowner association fees, and insurance and other costs.  Principal Payments on the mortgage, of course, do not get deducted from the gross.

6.  Most  insurance companies charge hefty additional premiums for vacant properties, or may refuse to pay claims if vacancy is not reported to them prior to a fire, natural disaster, or other casualty.  With renters in the home, owners insurance may reduce your overall monthly insurance bill, however, as you no longer have to insure any personal effects in the home.

7.  More than likely, there will be fix-up costs when the seller eventually markets the home or condo.  Of course, few tenants, if screened correctly, don't destroy the joint - but some repairs, repainting, and other cosmetic touch up may be required at lease term end in preparation for re-sale.

8.  As a landlord - the seller is still "on call and responsible."  If the heat goes out on Christmas Eve.  The toilet leaks on Easter.  Or the weather stripping on the back door is not adequate in the dead of winter.  Of course, you can contract with tenants to handle snow shoveling, lawn and garden care, and routine clean up around your home while they lease it.

9.  Leases are legal contracts - they can't be arbitrarily broken if you happen to find a buyer several months down the line.  Buyout is always an option - but the tenants in your home are under no obligation to leave early.

10.  Prospective tenants must be screened carefully!  An eviction can take 90 days or more here in the Chicago area, start to finish - and, with no rent coming in for that time, funds may get a bit tight!  Also, the rental market really dries up here during the months of November through February - so a vacancy or rent payment delinquency during those months can add up quickly.

In our experience, when presented with these 10 Items of Consideration, most sellers decide to REDUCE, and SELL!  But, they always have the Rental Option!

See our posting on our Team Blog Center - BlogChicagoHomes.com- from earlier today.  We cited an article by Lew Sichelman from today's Chicago Tribune here as well.

DEAN & DEAN'S TEAM CHICAGO