Thoughts on Leasing
One of the first lessons a new landlord learns is that there are numerous responsibilities associated with leasing and managing a rental unit. Today’s challenging real estate market has left many sellers with unsold properties. Frequently, these sellers consider the possibility of leasing their property. Whether this consideration is based on the need to cover the holding costs associated with a vacant property, or a desire to create an additional investment in real estate, there are a number of considerations a prospective landlord should consider.
Landlords should become familiar with their duties and obligations relative to their relationship with tenants. One easy reference for further information can be found at www.fairhousinginmichigan.org. A downloadable copy of a publication prepared by the Michigan Legislature entitled A Practical Guide for Tenants and Landlords is available on this site.
Prospective landlords should also consider the consequences of converting their homestead into a non-homestead property and the loss of the capital gains exclusion on the sale of their personal residence.
The homeowner would also be well advised to investigate the cost of insurance on a rental property, any requirement by the local municipality for landlord licensing, and to seriously assess their ability to manage the property.
The decision to lease may well be a viable option for the homeowner even after considering these issues. But as always, a well informed client is generally a more satisfied client.
Realtors are prepared to discuss these issues with their clients. As always, Realtors will also refer their clients to the appropriate experts in each particular field to make certain that their clients have the necessary facts to make an informed decision about the advantages and disadvantages of converting their principle residence into a rental property.
William Frohriep, Ph.D.
Associate Broker, Sales Manager