In general I’d say that the latter may ultimately be the better investment, but I’ll leave my personal demons out of this one.

With the housing market in such turmoil and homeowners facing situations such as a job relocation and a house that won’t sell, many owners decide renting their house is the only option left. But before you leap into the role of landlord-from-afar, be sure you do your homework; it can be challenging enough managing a rental from the same street, let alone from another state.

First and foremost you (or your real estate agent) need to do a market analysis of the rents that are being obtained on similar properties in the neighborhood, along with the vacancy rates, to ensure the plan is feasible and that you will be able to cover your minimum monthly expenses. And if you haven’t leased a property before, be sure you factor in not only your PITI (principle, interest, taxes, insurance) but inevitably there will be routine upkeep costs and unexpected repairs to cover.

Once you’ve confirmed the decision to rent makes economic sense, decide whether you want to take on the landlord role or hire a property management company to do it.  Property management companies screen potential renters for you, handle timely collection of rent, perform minor repairs and thoroughly check properties for wear and tear. In exchange for these services, they typically will charge 5 percent to 10 percent of gross rent received. If you are in a situation where you no longer live near the property you are renting, this may be worth the extra cost for peace of mind if nothing else.

Be sure you fully screen potential applicants, ask for references, and use a bomb-proof rental contract. A rental agreement should establish, in clear terms, the duties and responsibilities of the owner/landlord and the tenant. Don’t make the mistake of taking the word of “your buddy Joe who knows Sam through his brother and says he’s a cool guy”; you’ll probably regret it. There are sample contracts and rental agreements and forms available at the library or at bookstores, depending on the state you are in, if you do not plan to use the services of a real estate agent or property management company.

Renting your home can be a good solution in today’s market if it makes real economic sense for your individual situation. But you need to make sure you have collected and reviewed all the pertinent information on the potential renter, and go in with your eyes wide open; just like you would do with a marriage.

Does anyone have any other suggestions to those considering “landlordship” they’d like to add?

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