Realtors & the Rental Market

If you are a prospective home seller who is convinced that prices are temporarily depressed, what do you do? Contemplate renting.

If you are a prospective home buyer who is convinced that prices have further to fall, what do you do? Contemplate renting.

For the above-mentioned reasons, Realtors — myself included — are overlapping with the rental market much more often these days.

Buying vs. Renting — or Selling vs. Renting — is a case-by-case decision that depends on personal circumstances, time horizon, risk tolerance, and any number of other factors. So, I don’t presume to tell clients what to do.

However, I’d encourage anyone weighing the decision to at least consider the following questions:

Prospective Sellers

–If you are convinced that home prices will be higher next year — or in two years, or whenever — what is that belief based on?*

–As a prospective landlord, are you prepared to deal with property maintenance, tenant screening, insurance and liability issues, etc.?

–What is the condition of your home? If your home is in mint condition now, how much time and effort will it take to un-do the wear & tear associated with renting?

–What are your investment alternatives? Specifically, is collecting monthly rent a better or worse return on your money than selling and investing the proceeds elsewhere?

Prospective Buyers

–If you are convinced that home prices will be lower next year — or in two years, or whenever — what is that belief based on?*

–Where do you think interest rates will be when you’re ready to buy? Even if home prices are lower, higher interest rates may negate any savings (unless you’re paying cash).

–For the same budget, how do your rental choices compare to your purchase choices, net of any tax benefits associated with buying?

–If you have kids, how will renting (vs. buying) affect your choice of schools? Choice of neighborhood(s)?

Just because I’m a Realtor does not mean I automatically think everyone should own.

In general, the more short-term your horizon is, the more sense it makes to rent rather than buy. That’s also the case if you’re not prepared to maintain your property, or simply don’t have the money for the necessary upkeep (not to mention the downpayment). Of course, if you are new to a community, it can also make sense to rent until you know the area better.

Lending a Hand

As a Realtor, how do I handle prospective Buyers who decide to rent?

I try to be as helpful as I can, with the caveat that I’m not an expert on the rental market — it’s hard enough to keep track of home prices metro-wide.

That said, as a courtesy to my clients (and former clients), I’m happy to do an email to fellow Edina agents to see if they know of something; check Edina Realty’s (internal) classified ads for leads; and suggest such resources as rental agencies, Craig’s List, and even local university bulletin boards (online and off).

I’m also happy to keep my eyes and ears open.

While I was showing a home two years ago, I struck up a conversation with the tenant, who mentioned that their lease was expiring soon. Although my clients passed on the house, I had other clients who were looking for a rental in the area.

I put them in touch with the owner, who ultimately decided to take his home off the market and rent to my clients. (Based on my first client’s feedback from their showing, as well as my own market knowledge, I was pretty confident that the home wasn’t going to sell — at least not anywhere close to the asking price.)

*P.S.: If you know where housing prices are going to be in the future . . . by all means tell me!

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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