Should I Sell Or Should I Rent? That Is The Question!
With the real estate market rising, it’s quickly becoming sellers’ season! The recession is trickling away and housing markets are rising and homeowners are starting to grab their footing again. Hand in hand with the rising market comes the question “Should I sell my house or should I rent it out.” Well that depends!
Even though the real estate market is in a general upswing, it still hasn't recovered fully from the recession of 08. The job market on the other hand, even though on an upward slope, is still very limited, leaving homeowners struggling to pay their mortgage. That’s where leasing your property would come into play, but there are benefits to both options. Here are a few tips to help you decide if renting is for you.
Create a comparative Market Analysis:
Depending on where your property is located, there may be a high demand for rentals in that area. Check the rental prices in your area. Check to see how long the existing properties on the market have been vacant so that you can estimate the approximate time that your property could be vacant. It will take a significant investment of time and resources to do correctly, so
t’s usually best to hire a real estate professional or property management company to create this analysis for you.
Determine the expenses for the property:
Calculate the monthly expenses for your property. How much is your mortgage? How much are you taxes for the property? Do you want to offer insurance? Document any other costs that are associated with your property, for example HOAs’ fees. On top of the expenses for your property you should take into account extra costs associated with renting your property such as in cases where the tenant doesn't pay rent, or for periods of time the property is vacant. Another extra cost that is good to be aware of is damage costs. In most cases this can be covered by the tenant’s security deposit, but depending on the tenant, it may not always be enough.
Determine your net income:
After you calculate your expenses, determine if you want to break even or make a profit, and if you want to make a profit, by how much? This can help to determine how much you should rent your property for. There are some risks here, as you always could be setting the price too high. Choosing higher than average pricing could increase the length of your vacancies. Walter Molony, an economic issues spokesman for National Association of Realtors, said “You will break even if you rent out a place in some cases, and in most cases you will be profitable.” He adds “Investors swooped into the markets in 2011, 2012, and 2013 when they could buy up a place at a lower price” On another extreme, there are cases where your “breaking even” asking rent is much higher than what is justified in the market. In that case, you may have to consider enduring a negative income. This is only beneficial to you if the market is appreciating because in the future you will be able to sell your property at a higher price for profit! If the area surrounding your property is in fact depreciating it will obviously be better for you to sell your property because it will cost you to rent your property out and you won’t be able to get that investment back when you sell.
As a homeowner, leasing your property could be very beneficial. By leasing your property you allow your tenants to pay the mortgage while you wait for the value of your home to increase. But on the contrary, most homeowners are inexperienced when it comes to property management or simply don’t want to commit to the hassle of being a landlord, so they outsource their duties to property management companies. The costs associated with putting your property up for rent can actually be reduced by hiring a property management company because they will follow tested policies and procedures to get the right kinds of tenants into your property. They also will take appropriate actions to maintain your property at its optimum value.