With home prices and rents surging and an extreme lack of inventory in both areas, homeowners deciding whether to sell their house or keep it and rent it out have a tough, but lucrative, choice to make.
So in the current market, does it make sense to rent, or continue renting, or sell now?
If you’re the logical sort, you might want to check out some of the simple online tools that help you analyze the numbers. (http://www.forbes.com/fdc/rentorsell.shtml)
Let’s look further at the pros and cons of both options:
Reasons to Rent:
· You don’t need the cash from selling right now.
· You prefer to have a regular, monthly cashflow.
· With low interest rates on savings and money market accounts and the high demand for rental properties, holding and renting your house may be the most productive use of your capital.
· You believe that your property will continue to appreciate.
Reasons to Sell:
· You need the cash from selling –either to buy a new house or to finance retirement, traveling, etc.
· Prices are high and demand is strong NOW. Who knows what the future holds? If you believe that a bird in the hand is better than two in the bush, now is a good time to sell.
· You believe that the price of your house is at a peak that won’t be going higher anytime soon.
· You may be able to get a tax break of up to $500,000 (for couples) on the profit from selling your house.
· You don’t want to deal with all the headaches that come with renting.
Beyond all the logical reasons to rent or sell, you also need to consider your temperament and emotions around your home.
My friends are a perfect example of how a strictly financial decision wasn’t the best. They were making a move a few years ago when the real estate market was down. They didn’t need the cash and could rent the house to cover their mortgage and other expenses. They figured that hanging on and renting their house until the market improved was the best logical choice.
However, they quickly discovered that renting was not for them because:
· They learned that renters, even of high value properties, often have bad, even horrible, credit histories. One family that seemed ideal had a credit report that showed hundreds of thousands of dollars of debt—mostly to Neiman Marcus and Saks.
· They loved their family home and worried about that renters wouldn’t take proper care of it.
· They realized that they didn’t want to deal with persnickety tenants who might bug them about any little problem.
· They discovered that California law heavily favors renters vs. landlords and they didn’t want to risk time-consuming and costly measures if they ended up with a problem tenant.
To summarize, know your situation. If you are moving out and do not wish to deal with possible tenant issues, vacancies in a changing market, marketing the property or other issues, now is a fantastic time to sell. However, if you don’t mind the possible headache of dealing with tenants, and are not able to get a sensible sale price, it may be worth renting the property out.
Call me for an in-depth analysis on your situation and to find out whether it would be better to rent or sell your property.
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