Renting is suddenly cool: these days, renting is about lifestyle and flexibility, says Jane Hodges, author of the newly published Rent vs Own (Chronicle). And because renters just want to have fun, they often are willing to pay a premium for a nicely restored vintage house.
That’s important to know if you are calculating the cash flow you could capture by placing your historic house on the rental market. Renting is a viable alternative to selling outright if you must move on account of a job transfer, family demands, or other factors. And if you are thinking of buying, improving, and renting a vintage house as an investment, market rent is the key factor in capturing your return. (Note: Check back with us next week when Money Matters Monday reveals the formula that institutional investors use to estimate cash flow and return on residential properties.)
As she surveys the rental and ownership housing markets, Hodges has noticed a sea change in the motivations of renters. “In the past, people rented until they bought a house because they were getting married or having kids,” she says. “If they wanted a house, they had to buy a house.”
But more people, including former homeowners, are now renting for a variety of reasons. They might have sold their properties and are taking time to scope out their next purchase. They might be trying out different neighborhoods. Or they might have decided that the life of a corporate nomad is more in sync with renting than constant ownership churn. They might be interested in renting with the possibility of buying. Or not.
When people who could buy decide to rent, the economics of investing in rental properties change fundamentally. These days, institutional investors expect annual returns of at least 20% on their portfolios of rentals, so that’s a good way to frame up your own investment parameters.
If you’ve got a polished vintage home, you likely can get top dollar for it in today’s market, even if you are competing with new apartments and rental condos, says Hodges. Lifestyle renters want a brag-worthy home.
She recommends these four tactics for capturing top dollar for your historic rental:
1. Compare local rentals, weighing lifestyle amenities as well as raw price per square foot
2. Check with property managers to see what neighborhoods and types of houses are most in demand
3. Contact corporate relocation experts and agencies to get your house in front of executives who want a pretty place to park
4. Consider working with a real estate agent who specializes in ‘luxury properties’
“Owning a home is part of the American dream,” says Hodges. “But these days, if you’re well off, you don’t have to own the house to prove you’ve made it. You can rent it.”