Letter Re: The “Sell Your House and Rent it Back” Option in a Falling House Market


In a recent e-mail, you suggested considering selling my house and renting for a period of time, or at least until the real estate bubble stabilized.

[JWR’s replies are in-line, in bold text.]

1.) Do you still recommend doing this?
Yes, if you are living in a bubble region that is likely to see steep house price declines. The big question now is: can you find someone willing to do this? A year ago or even just six months ago, it would have been fairly easy, since the market was still rising. Now, with prices falling, it might be hard to find someone willing to make such a deal.

2.) And, if so, how does one go about this? Do I look for someone to buy my house and then rent/lease it back to me?

The best way to do this is to look in your local telephone book and find listings for property management companies. Call and ask if they are looking to buy rental houses. If so, tell them that you own a house that you’d like to sell and rent back. If they are currently investing in rentals, then you would be ideal candidate: No break in their cash flow (due to vacancy), no move-in wear and tear on the house, no need to paint, re-carpet, or otherwise prep the house (which is a bottom line expense for them), and you already know exactly how to maintain it.

3.) How long of a rent or lease period do you suggest?

I wouldn’t recommend signing more than a one year lease, followed by a “month to month” rental arrangement. That way you can be more flexible in case you decide to move somewhere in a hurry. For example, in case you feel the need to “Get Out of Dodge”, or for when you think that the regional housing market has bottomed and you want to re-invest.

4.) Since I’ve only been living in my current home for two years do you think that this concept applies to me? (i.e. my current equity is about $35,000)

That might be marginal. But in a falling market, wouldn’t it be better if the property management company lost equity in the house, rather than you?

I thank you for your helpful response. Baruch HaShem Yahweh (Blessed is the Name of Yahweh) Sincerely, – Dr. Sidney Zweibel