| ||
|---|---|---|
|
It is not uncommon for a homeowner to have purchased a home with plans to live in it long-term, only to face an unexpected move from the property due to a job transfer or other life circumstances.
When this happens, the property owner must make a make the decision of whether to sell the home or to rent it out. If the homeowner has a low interest rate in place or if the sales market is slow, this can be an even harder decision to make.
There is no right or wrong answer to this decision—rather, it depends on personal circumstances and long-term goals. To make an informed choice, consider the following questions:
1. Will the Property Make a Good Rental?
Not every home is an ideal rental property. High-end, custom, or uniquely designed properties may be difficult to rent or may not generate a strong financial return. If you have a property that will not make an ideal rental home, then you should strongly consider the decision to sell it, rather than rent it.
2. Can You Emotionally Detach?
Transitioning a primary residence into a rental property requires an objective mindset. If the home holds sentimental value, it could be difficult watching tenants who do not have the same emotional attachment changing key features of the home’s style, colors or even “living” in the home. Viewing the home strictly as an investment property, rather than a personal residence, is essential for a successful rental experience.
3. Do You Have Financial Reserves?
Owning a rental property requires ongoing financial expenses. Repairs will be necessary, property taxes and insurance will have to be paid, and the market rental rate may not align perfectly with the mortgage payment. While a low interest rate can provide a financial buffer, it’s crucial to have reserves for maintenance costs and potential vacancy periods. A rental property should never be dependent on 100% occupancy for financial viability. We recommend all real estate investors hold a reserve equal to three times the amount of the monthly rent.
4. Do You Plan to Sell in the Next 12 Months?
Some homeowners may consider renting out a property for a short period of time, often due to a slow sales market, with the hope that the sales market will improve over a short period of time, and then they can sell. However, this approach has risks. If the property has been recently upgraded with expenses like new carpet, paint, or appliances, a tenant may cause wear and tear that results in additional expenses when preparing the home for sale later.
Additionally, market trends indicate that home prices are unlikely to see significant appreciation within a 12-month period. If the goal is to sell the property within 12 months, we recommend simply selling the property now in order to minimize future risks.
Make the Right Decision for Your Financial Future
For those seeking long-term financial security, converting a property into a rental may be a wise choice. Many owners who initially planned to rent out a home for only a few years now enjoy fully paid-off properties generating steady recurring income. However, this decision should be based on property suitability, financial preparedness, and long- term goals.
Grace Property Management provides expert guidance in both property management and real estate sales. Contact us today to determine whether renting or selling is the best choice for your home.
We even provide a rent vs sell calculator to help with the decision.
At Grace Property Management, we believe that when property management is performed with integrity and transparency, both tenants and landlords benefit. Property management is not just our business - it is a relationship between us, our owner-clients, and our tenant-residents.
If these are important to you, we may be a good fit to provide you, your property, and your tenant-resident with our full-service property management services.
Feel free to reach out to us for assistance.
Grace Property Management & Real Estate
Serving real estate investors and residents since 1978.
303-255-1990
