Should I rent if the market is slow?

I met with a lovely couple yesterday who were trying to figure out whether they should list their property or find a short term  tenant. It had been tenanted but their wonderful tenant had just given notice to leave at the end of  November. That  is practically the worst time in the year to sell. The property will need to be staged once the tenant moves out to show at its best.

We had a lengthy chat about their various options, which I thought I would put in tabular form. (I actually did this when I was with them, outlining  all the pros and cons, as we went through them together):

When to list Pros Cons
List now, with tenant in place Property would be on the market if there are any buyers looking. Property doesn’t show well; hard for buyers to see past current tenant’s belongings, or to imagine what it would look like vacant.
Wait until tenant moves out and list in early December. Property will be vacant, can be cleaned and staged, easier to show. Not much activity in December; property likely to have more interest in the spring; will be vacant, which means sellers carrying costs until it sells. Because it’s winter, it may not sell quickly, and could become stale-dated.
Try to find a short term tenant until the spring and list then. This would cover the carrying costs of the property. It’s a good option if such a person can be found. Can be hard to find a short term tenant; is often someone who needs a furnished rental; property may need to be furnished at an additional cost, could be some wear and tear. Smaller pool of people looking for short term rentals than longer term.
Look for a long term tenant and wait to sell until the market picks up. If there is a good tenant and the rent covers the property’s carrying costs, this is a good option; it lets the seller wait until the market improves without losing money. There will be wear and tear from a tenant. Lease would likely be for 12 or 24 months, which means the home would be on the market again in the winter when it expires, but seller  can always try to  negotiate a different term (eg 18 months).
Put it up for sale and for rent for a long term tenant at the same time and see what offer comes in first. This option broadens the pool; it gives the seller strength in negotiations if a buyer comes along because the buyer will know the seller has the option of renting.  And if the property rents first, that covers the issue of carrying costs for now/until the market recovers. If the property rents before it sells, seller will have to take it off the market. There will be  some wear and tear to deal with before listing it for sale in the future. Property may not rent or sell before the spring (although that problem applies to all the options). Same issues re timing of lease expiry so it doesn’t have to be listed in the winter later on, but these can likely be negotiated.

We decided that I would look around to see if I can find them a short term tenant by posting up some information at my office (I’ll put up a blog post here as well). You never know; there may be people around who need short term accommodation, for example, while their new home is being built.

We’ll wait to do anything until the tenant moves out, as there is no point listing a property until we can show it at its best.

And we will put it on the market for sale and for rent and see what kind of activity we get and what happens first. Make sense?

 

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