No, I didn’t get that backwards, the title says exactly what I meant it to say. For the past nine or ten years, and for a wide range of reasons, many people and families have gone from homeowner to renter. Usually, it’s the other way around, but in this article we’ll be looking at some of the reasons why it can go this way, and some of the typical expectations you should have if this is happening, or about to happen, to you.
Why Would Homeowners Choose to Rent?
Homeowners revert to renters for a multitude of reasons, some at their own choosing, others maybe not so much. With the wave of homeowners who lost their jobs and/or homes following the Great Recession still having a fallout even to this day, many good homeowners were forced to become unintentional renters for as long as it took (or still takes) to get themselves back on track. And although renting is often considered to be less expensive than owning a home, when certain economic conditions exist, homes for rent can sometimes be more expensive than owning. So no matter what your reason for becoming a renter, always check the area market conditions and prices to find out how much bang you can get for your buck.
Getting Back in the Real Estate Saddle
While there are always a few renters who always stay renters (and there’s nothing wrong with that), many people, especially former homeowners, try and make another stab at home ownership sooner or later. Depending on how the last home ended, it might take as little as two, or as many as ten extra years before you can own again (unless you pay all cash). Check your credit report and either do it yourself, or work with a credit repair agency to rebuild your credit to “good interest rate” ranges. Save some money because you’ll need it to move into your next rental, but you’ll also need to start growing a little nest egg as soon as possible to make your future loan downpayment. Except for Veterans, there aren’t any 100% guaranteed home loans out there anymore. I recommend not having less than ten thousand dollars for your downpayment, but more than that is even better.
Renting Can have Ups and Downs
Renting brings with it certain luxurious benefits you don’t get with regular home ownership. If something breaks down, you pick up the phone or send an email, and somebody shows up and fixes it. This should also be mentioned as a common sticking point between Owner and Tenant; repairs. Specifically, how to handle them quickly, professionally, and in a way that keeps the tenant happy. That’s not to say that a landlord has to live at the tenant’s beckon call, but maintenance is one of those areas where things can go really right or really wrong, really fast. So use your good judgment, or the good judgment of a good property manager, and get things fixed in a reasonable time. This is something that every new landlord and new renter has to learn to adjust to.
Adjusting to Changes
As the renter, it’s nice not to have to pay property taxes, home insurance, HOA fees, special assessments, and so on. Yes, most renters pay their own primary utilities, but in some areas, you might even get someone to mow your lawn and clean your pool for free. And if it breaks down, they fix it! It can’t get any better than that, right? Well, yes it can, because we haven’t mentioned much about how worse it can get. Owners can go into foreclosure without letting their tenant know, homes can be sold out from under month-to-month renters, and “slum lords” can fail to maintain properties in habitable conditions if a problem develops.
Restoring your Vision
After the initial adjustment to becoming a renter settles in, you can start working on the steps returning to home ownership again. Depending on your situation, it could take a few, to several years. I always recommend talking to a Mortgage Lender early to see what you can afford and how much you need to save up to afford it. Bear in mind, interest rates change, and those prices won’t last forever, but it does give you a starting point of reference. Get your credit check done early and see if anything unattractive comes up. Contact any outstanding debt collectors and offer to settle for pennies on the dollar. Budget your income and save some money. Watch the market and stay in touch with a good Buyer’s Agent over time. Many people who buy a home don’t realize that, in most cases, working with a Buyer’s Agent Realtor is free and can be extremely beneficial. So find someone you like and work with that one person continually. A Buyer’s Agent has a legal duty to help you avoid traps and pitfalls, and can keep disagreements from turning into disputes that could develop into lawsuits, so getting protections like that for free is obviously worth the cost.
Buying a Home Again
Renters buy homes into two categories. The first group buys homes they plan to convert to future rentals, and the second group who simply intend to move and sell. If you’re thinking investing in real estate, buy the least expensive nice home you can afford. Fix it up, paint it new, don’t leave any sore thumbs sticking out, and whether you choose to hold and rent, or sell and upgrade, the better you improve and preserve it, the better your return on investment will be. Here at Management 1 Tri-Cities Realty & Property Management, we understand what it takes to transition from a renter to a homeowner because we work with people like you all the time and understand the specific challenges you face. Contact us if you currently renting a home and would like more information about how to buy one. It’s our specialty and we’re always here to help.