Should I Sell or Rent My House?
How do you decide if you should sell or rent your home? What if you are already renting it? Should you continue to rent it if the renter is going to move out? Or, should you sell it and buy another property? All of these questions need to be considered. This blog post outlines a lot of the thoughts I have surrounding this.
I’ve noticed in researching ideas, I spend sooo much time researching and forget my goal. So, from now on, I’m going to have a ONE THING for each post. What is that one thing? Well, it’s what my ultimate goal is as opposed to spinning off on several other topics.
Going forward, this post will be updated a lot as times change and I learn more. If you have input, post it!
NOTE: This blog topic is currently being researched and will be updated periodically.
- Make residual income
- Want to use the property.
Life Goals effected
- Would want to live in multiple vacation locations around the world when I retire or completely work independent on location.
- What are my future goals and how does this house effect them?
- Can my current finances allow me to rent my home?
- Are homes renting in the area?
- Can I handle being a landlord?
- How will my taxes be effected if I rent or sell the home?
- What is the estimated value of the home now and in the future?
- Am I going to sell or rent my first home?
- Am I going to sell or rent my second home?
What are my future goals and how does this house effect them?
I think this is my most important question. If I don’t have a plan for my future, my kids future, etc., then I’m not really making progress. So, what are my long term goals and how does the decision on this home effect them?
My ultimate goal is to provide residual income for myself and my family. I would also like to have vacation homes that I would like to visit. Of course, I would want these to be profitable as well.
So, this current house, I would not want to visit. The only reason I would keep it is if it produced enough residual income. But, if not, then I should redirect the proceeds from the sale of this house to the purchase of another which fits my goals better.
Can my current finances allow me to rent my home?
The real question here is if this house does not rent, can I afford the monthly mortgage? So, I would have to figure out how this will effect me. It could greatly effect me if the house takes a while to rent because this will effect profitability.
So, what is the profitability, short term versus long term. So, for the long term, if I don’t make a monthly profit, then I will only make profit from the principal. Here’s a breakdown: (Note: This is all just an estimate and I’m using sample numbers so I can see the influence of time and money.)
- 12 Month’s of Mortgage Payments: $1,500 * 12 = $18,000
- 12 Month’s of Rent: $1,750 * 12 = $21,000
- 12 Month’s Principle: $500 * 12 =
- 12 Month’s of Full Income Rental: +$3,000 Profit + $6,000 Principle Profits = $9,000
- 12 Month’s of Full Principle Rental: $6,000 Principle Profits
- 12 Month’s of Full Income & Principle Rental: +$3,000 Profit + $6,000 Principle Profits = $9,000
- Yearly Income Break Even (No-Principle adjustment):
- 12 Months: $3,000/$1,500
- 11 Months:
- 12 Months: $3,000/$1,500
Are homes renting in the area?
So, I have to find out how I can tell if homes are renting in the area. As a precaution, I am going to start using Trulia to search for rentals in my area and on a weekly basis track whether or not the existing homes rent. Why? Well, a property manager is going to say they are renting and it depends, etc. I’m not sure if there is a program or software that would show properties rented in the area. I’d like to have some of my own research. I may even contact some of the other rental home owners to find out how they are doing.
Be aware that the property manager will want the deposit (1 months rent) as a commission for renting the property. This greatly effects the income from the property.
Is there a place online that can show me if homes are renting in the area? Yes, I ended up using Trulia and am tracking rental properties in the area to find out how long it takes them to rent.
Can I handle being a landlord?
Being a landlord hasn’t been that bad recently. The main concerns I have are just making sure people pay rent, and how to handle the gap between new renters. I’ve found that if I rent properties that are of relatively higher value or in better neighborhoods, the renters are better. I get an issue every once in a while.
Note, I do check in with my renters to say hello and see how they are doing. It adds a nice touch and they tend to spend more time in the property and have in the past given me new renter referrals. Also, they are pretty good about giving me notice on changes.
Do be careful with communication. I’m sure there is some law about how to communicate. Remember, some people can take communication as a way to bitch and moan. So, again, be careful.
How will my taxes be effected if I rent or sell the home?
TBD.. .checking with CPA