Complain about a product or service

Is It Time to Take In Boarders?

Renting your house or taking in boarders beats foreclosure

By Fred Yager
ConsumerAffairs.com

July 20, 2008

Some are facing foreclosure. Others may be unemployed and trying to downsize, or they’re about to retire and had planned to use the shrinking equity in their homes to fund their retirement.

In any case, they all desperately want to sell their homes, but can’t because so few people are buying right now and mortgage money is hard to find. Many potential buyers are holding off on their purchases, fearing the value of any house or condo they purchase will drop as soon as the ink dries on the closing documents.

Therefore, homeowners with mortgages they can no longer pay, on homes that are worth less everyday, are seeking alternatives such as renting their house until the market improves or even taking in boarders to help pay the mortgage.

Both scenarios have their pros and cons.

Renting your house

If you’re thinking about renting your house, the first thing you have to consider is where you will live.

If you rent your house to someone else, you have to move out. Are you buying another house or will you be renting as well? The next question is whether you take everything with you or do you rent your house furnished or partially furnished?

Second, once you take on renters, or boarders for that matter, you become a landlord and that comes with its own set of responsibilities. You’re responsible for all repairs, even though you no longer live there. You may also be liable if your tenant or someone else is injured on your property.

Third, how does renting impact your ability to eventually sell the property? Real estate agents are divided over this issue. Some will argue that while occupied homes tend to show better than vacant ones, that may not be the case when the home is being occupied by a tenant and not the owner. One reason is that the tenant may have signed a one-year lease, or may not be ready to move out when you want them to.

On the other hand, you shouldn’t leave a house unoccupied for an extended period either. Insurance rates will go up, if you can even get insurance since most companies won't cover a vacant house after 90 days. Moreover, a vacant house attracts squatters, thieves and vandals.

Then there are those tax incentives to consider such as the one-time capital gains exclusion that requires you to live in the house for at least two of the last five years. If you rent your property for more than three years during that period, you lose that exclusion.

On the other hand, if you convert your primary residence to a rental property, you can deduct your mortgage interest payments, depreciation and other expenses. This might not help you right away but it can create some substantial savings at tax time.

If you choose to rent while you put your home on the market, make sure your tenants agree to let the house be shown by you or real estate agents whenever someone wants to see it. The tenants should also agree to maintain the property in what realtors call "show ready" condition.

In fact, if you have a lease — experts say you should have a lease for your own protection — make sure it clearly states specific tenant requirements regarding their role in the entire process from flexible show times to maintenance.

A key section of the lease should stipulate that the tenant be prepared to move if and when the house is sold. Many realtors recommend a month-to-month lease to maintain this flexibility. This works for the tenants as well because it allows them to move quickly if they decide to buy a home.

A third alternative to renting and borders is something known as “house sitters.” There are even house-sitting companies that screen potential sitters as well as the furnishings they plan to bring with them. Typically, a sitter agrees to maintain the house in “show-ready” condition and to be prepared to move out with two weeks notice.

Taking in boarders

Here you’ll find support from home-sharing agencies that cater to this situation. One nationwide agency is the St. Ambrose Housing Aid Center Homesharing Program in Baltimore. They screen potential boarders to try to match boarders with home owners. This helps to alleviate the fear you may have of allowing total strangers to live in your house.

Home-sharing agencies conduct background checks on the boarder and the homeowner, screening out people with criminal records or histories of drug or alcohol use, as well as homeowners in shaky financial situations who may be facing imminent foreclosure. They also give out a ten-point questionnaire asking potential boarders and homeowners how they feel about pets, smoking, and overnight guests.

Deciding to either rent out your home or take in boarders is a difficult decision you should not take lightly. But if you are running out of alternatives, and if you believe — like many — that this poor housing market is going to continue a downward decline for another year or two, then becoming a landlord may be a necessary course of action.

Just keep in mind that with either renters or boarders, you must be prepared to deal with possible conflicts over everything from noise levels to privacy issues.

Most home-sharing agencies have different procedures for resolving conflicts, but in the end, the final responsibility will be with you and whoever you share your home with. Build into any agreement or lease an “out. clause," outlining the terms under which either party may call an end to the arrangement.

In New York, homeownerowners have to give renters sixty days’ notice to break their arrangement; renters must give their landlords thirty days’ notice. The laws vary from state to state, and some states may not regulate the practice at all. Be sure your agreement complies with local and state laws.

You should also check to be sure that taking in boarders is permitted in your neighborhood. Zoning laws in some localities sharply restrict the practice. A quick call to your city or county offices should answer the question.

Whatever course you choose, don't feel bad. You're not alone. Millions of Americans are in dire financial straits through no fault of their own. All we can do is muddle through as best we can.

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Back to the top |