Right after buying my first house, my job caused me to relocate to the other side of the world for two years. Using a property management agency, I decided to rent out my house and then move back into it when I returned. However, after those two years elapsed, the renters wanted to stay. I’d saved up enough money to make a down payment on another house, which is exactly what I did. Again, my job sent me to the other side of the world, this time for three years. So, I had two houses rented out. After returning to live in my own home for three years, I was sent over seas for another five years. During a period of twenty years, both houses were paid off. Upon my final return, one house had just become vacant so I decided to move into it myself.
Then reality set in. The carpet was worn and stained, many of the outlet and light switch covers were cracked, broken or missing. There were nail holes everywhere, and all the window treatments were in various states of disrepair. Many walls had been amateurishly patched and spot-painted in a haphazard manner and the baseboards and moldings throughout the house either had drips of paint on them or the varnish had worn off. The interior window sills had dried out and many had water ring stains that must have come from potted plants. A bedroom door had scratches and gouges on its inside surface, from about waist high down to about a foot. Disturbingly, I noticed that the door knob had been reversed so that the door would lock from the outside of the room. I realized that the damage to the door must have been made by a child locked in that room, beating on the door, trying to get out.
Worse yet was the back yard. The huge, round bare spot. The wooden privacy fence falling to tatters. Then there was the tree I had to remove. The tree had grown tall and its branches spread widely, covering a third of the garage roof’s surface, its branches swaying with the wind to tear up the shingles. In the bathrooms, the faucets leaked and the fixtures were corroded and cruddy. The right thing to do was embark on an aggressive re-model before moving in, but there was no time. Everything I owned was being shipped and would arrive soon, and my fix-it guy tools were in that shipment. I fixed what I could and two years later I’m still doing minor repairs.
My initial decision was to sell the second home, to avoid having to deal with another beat-up house. However, the renter is still there and wants to remain. When I got a call from the rental agency that the hot water heater needed replaced, I went to have a look at it. It was bad, so I replaced it. At the same time I was able to see that the renter was taking good care of the house. Neat, clean and organized. After replacing the water heater, I encouraged the renter to call about anything else that might need to be taken care of. The front yard tree was overgrown and diseased, so I removed it and planted a sapling. The house needed painting, so I took care of that. There was a quirky problem with the wiring of the hallway that would not power modern Compact Florescent light bulbs, so I called a qualified electrician to fix it.
So overall, whether it’s better to rent out or sell a house depends on the tolerance for potentially bad renters, as well as the amount of time the homeowner can devote to taking care of the property. After years of being a landlord, I feel it’s better to rent out a house than sell it. Just beware; even when using a property management agency, rental income is not passive income. It does require involvement, capital re-investment, and hard work.