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Ask Andrew: Rent Or Sell?

By WTOP Staff

Ask Andrew

This sponsored, biweekly Q&A column is written by Andrew Goodman, Associate Broker and top producing agent with Gallagher & Co. Real Estate, Inc. Based in Bethesda, Andrew serves clients in Maryland, D.C., and Northern Virginia. Please submit comments, questions, and opinions in the comments section or via email.

Question: Should I rent out my place or should I sell it? If I rent it out, what do I need to include in the rental agreement?

When determining whether to rent out your home or to sell your home, you must consider these things:

Rental Income or Loss – Would you, as the property owner, be earning rental income on the rent received or would you be losing money after you pay the property’s mortgage payment, condo/HOA fee, taxes, insurance, and other costs?

If you are going to be losing money each month, even if renting is tax deductible, it may not be the smartest move to rent out your property.

Next Move – Would you be renting or purchasing your next home?

If you are going to buy, you need to check with your lender to see if you qualify for a loan on the new property while still holding on to your current property. A lender will typically count the mortgage payment of the current home against your debt to income ratio, unless you have at least a years worth of rental income on your tax returns or 30% or more of equity in the rented-out home.

There are also strict guidelines as to whether your next home will be considered an investment property or a primary residence. That could increase your interest rate and make your new home less feasible and desirable from a financial standpoint.

Current Market Conditions: Is the current local market appreciating or depreciating?

If the market is just starting to improve, it may be best to rent out the home now in hopes to get top dollar later.  Also, if you are selling at the height of the market, you will be buying at the height of the market or vice versa.

The ideal would be to sell at the height of the market and buy at the bottom of the market. But we all don’t have the luxury of holding on to a second property while conditions improve. If you had to choose to sell and purchase all at once in either an up or down market, I would advise to make your move in a high market with the theory that you would sell your current home and have a larger down payment for your new home, or at a minimum, not have to bring as much money to the table to sell it. Obviously, this all depends on your specific financial and housing situation.

Condition – When renting out a home, remember a home is still being lived in and will have, at minimum, some wear and tear. So prepare yourself to do at least some cosmetic work to the property after the lease is up or before you put the home on the market.

Landlord Responsibilities – Can you handle being a landlord? Being one brings many obligations. You will have to be there if something has to be repaired or goes wrong. You also have landlord-tenant rights to abide by. Be sure you know all that is expected of a landlord prior to engaging in a lease.

Some owners like to hire a management company or a Realtor to manage the property. This is completely normal and highly recommended. However, if you have just one property that is being rented out, you may be able to handle it on your own. When hiring a management company they will do everything from finding you a tenant to handling the phone calls if a problem arises. However, they do collect a fee for their services.

In Montgomery County, you are required to obtain a license to rent out a property. The license costs $98 per year for a single family, townhouse, back to back, duplex, or quadraplex property and $56/year for a condominium or piggyback townhouse. A license is needed for each property rented out. If you rent a property out without a license you could be fined $500. You are not required to obtain a license however if you rent out a property to a relative. Please note, if a property was built prior to January 1, 1950, proof of current registration with the MDE Lead Poisoning Prevention Program and proof that an accredited inspector has certified that the property meets one of the required inspection standards must be submitted with the application.

If you choose to rent out the property on your own, make sure you include the necessary documentation in the lease agreement (a management company or Realtor will be able to provide this if hired). Please note that if your home was built on or before 1978 Lead Based Paint documentation is necessary. Don’t forget, if you are apart of a condominium or a HOA, to include information from your HOA/Condo association, as tenants must follow the rules of the community. The community may also have documentation that the tenant needs to fill out so make sure to contact your community’s management company.

Everyone’s financial and housing situations are different. Please consult your Realtor, lender, financial advisor, etc., to help you make the right decision for you and your family.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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