Life is full of changes-divorce, bankruptcy, job transfer, death in the family or any host of issues that can force you to start packing up boxes and hiring movers when you were more keen on making some home improvements, redecorating or planting a garden. So now you’re faced with the conundrum of listing your home on the market or becoming a landlord-neither of which had you planned on doing anytime soon, if ever in your life. Here are some major items of consideration before deciding on either route.
IS THE MOVE GOING TO BE LONG TERM?-
Perhaps a family member has passed and you must relocate to handle family business. Or your job has transferred you to an out of state office. Whatever the case may be, evaluate if there is permanency in the arrangement or if your stay is up in the air, per say. If the length of your stay is indefinite, it may be a much better option to rent out your home so as to be able to continue to pay off the mortgage with the rental revenue and even profit a bit in the process. If you are not privy with becoming a landlord, hiring a property management company to act as intermediary between you and your tenant is often preferable and surprisingly cost saving. PMC’s know the in’s and out’s of the industry-adhering to laws on a local, state and even federal level. They are familiar with code regulations and all issues of compliance that will affect running your home like a business.
Are you over leveraged on your mortgage? Completely upside down? Conversely, did you refinance and lock in a super low interest rate that would make renting uber profitable in your market? Additionally, it may help build your nest egg as tenants pay rent each month, your mortgage interest and repair cost should offset you having to pay any tax on that rental income. Once your tenants have paid off your mortgage, you are then sitting on a substantial amount of equity and can either cash in on it, or keep on renting it and use it as a long-term investment.
Does the property need to be updated? Wood paneling? Shag carpeting? Casement windows? Okay, maybe not totally the Brady Bunch house but perhaps it’s lacking the necessary updates a home buyer is expecting. Today’s buyer typcially expects modern finishes, stainless appliances, high efficiency mechanicals and the like. If your property could use some updating it may be a smarter option to rent, as renters are more willing to overlook such things. They are of the understanding that they are merely living there temporarily and have no stake in the property.
The bottom line when asking yourself, “should I rent or sell?” is to look at your unique circumstances and weigh the two options. Though you probably didn’t purchase the home with the intention of being a landlord, hiring a property management company can eliminate many if not all of the challenges that come with that role. Basically, if the aforementioned scenarios are applicable to your situation, renting would be a worthy route to explore. Your mindset should then be that of an investor who now not only has a property, but is running a small business. Make sure you make a wise decision on who you trust to manage that investment. It may be one of the best decisions you ever make.