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Is it financially smarter to sell or rent out a home?
Posted on 8/25/20 at 9:39 pm
Posted on 8/25/20 at 9:39 pm
Relocating soon and thinking about renting out my home instead of selling it. Seeing how I will not be in the same city, I would pay a management company to take care of it.
Any downsides? Experiences? Financially smart or just personal preference?
Any downsides? Experiences? Financially smart or just personal preference?
13
Posted on 8/25/20 at 9:42 pm to BabyTac
Give us some numbers to work with.
How much is the house worth? How much is your note? What is the market around you both from a selling and rental perspective? What would it rent for?
How much is the house worth? How much is your note? What is the market around you both from a selling and rental perspective? What would it rent for?
Posted on 8/25/20 at 9:52 pm to ItzMe1972
How old is the house? How long before big ticket items (roof, a/c) are in need of replacement?
Posted on 8/25/20 at 10:01 pm to BabyTac
100% depends on the numbers. Financial success is a math problem
Posted on 8/25/20 at 10:46 pm to BabyTac
You’re going to get a lot of different answers here. From personal experience even with a management company, renting my home was a major headache. Financially, it made sense for us but people just don’t take care of shite anymore
Posted on 8/26/20 at 7:33 am to BabyTac
The first question I’d ask myself: would I buy this same property under the same circumstances that you have now (whatever the mortgage payment and management fees may be) if I was already living in the new location? In short, what does the prospective net positive cash flow look like?
Also, do you have intentions to move back to this location, and occupy this home again, within the next 5-7 years? Has this city experienced above average appreciation over the past few years and, if so, is that likely to continue?
Positive cashflow and/or appreciation are generally how you make money in real estate. Any decision based on an emotional attachment usually leads to losing money and/or having an ongoing headache.
Just my 2 pennies. Good luck.
Also, do you have intentions to move back to this location, and occupy this home again, within the next 5-7 years? Has this city experienced above average appreciation over the past few years and, if so, is that likely to continue?
Positive cashflow and/or appreciation are generally how you make money in real estate. Any decision based on an emotional attachment usually leads to losing money and/or having an ongoing headache.
Just my 2 pennies. Good luck.
Posted on 8/26/20 at 7:50 am to BabyTac
If you do rent it, you might want to sell it within 3 years if you have any substantial gain on the house so that you will be able to exclude the gain on a sale. Otherwise, you'll either have to recognize and be taxed on the gain or live in the house for at least another 2 years before you sell it. Also, to the extent that you are allowed depreciation on the house while you are renting it, that will be ordinary income when you sell the property that cannot later be excluded.
This post was edited on 8/26/20 at 7:52 am
Posted on 8/26/20 at 8:22 am to BabyTac
Lot of questions here - just a few off the top of my head:
1. What's the value of home?
2. What's the outstanding mortgage owed?
3. What is projected rental income?
4. Taxes and insurance?
5. How long have you owned the home? Are you subject to taxes within two year time frame of original purchase?
6. Who will manage the property and what is their fee structure?
7. Most companies offer relocation benefits or packages and some of them include provisions for home sale. When I was back on the corporate bandwagon I moved 6 times and bought and sold three houses. Each time my relo package included a 90 day provision for home sale (company would list home with an agent and pay commission, I keep profit on sale, but after 90 days company would buy house at appraised value average of three local appraisers with a price floor set at 3% loss). Would you forfeit any such benefit by renting?
A 1500-2000 square foot home in a decent area is a lot easier, figuratively speaking, to rent than a 4000 square foot home in the country. There are almost too many questions and hypotheticals given the information you've provided.
1. What's the value of home?
2. What's the outstanding mortgage owed?
3. What is projected rental income?
4. Taxes and insurance?
5. How long have you owned the home? Are you subject to taxes within two year time frame of original purchase?
6. Who will manage the property and what is their fee structure?
7. Most companies offer relocation benefits or packages and some of them include provisions for home sale. When I was back on the corporate bandwagon I moved 6 times and bought and sold three houses. Each time my relo package included a 90 day provision for home sale (company would list home with an agent and pay commission, I keep profit on sale, but after 90 days company would buy house at appraised value average of three local appraisers with a price floor set at 3% loss). Would you forfeit any such benefit by renting?
A 1500-2000 square foot home in a decent area is a lot easier, figuratively speaking, to rent than a 4000 square foot home in the country. There are almost too many questions and hypotheticals given the information you've provided.
This post was edited on 8/26/20 at 8:23 am
Posted on 8/26/20 at 9:05 am to BabyTac
Sell it. If you wouldn't buy it rent now as a rental, don't rent it.
Chances are you paid full retail price so your ROI on your purchase price won't be good. You may make money in the end and in hindsight it make sense, but if you aren't in the same city it can very easily turn into a PITA.
Chances are you paid full retail price so your ROI on your purchase price won't be good. You may make money in the end and in hindsight it make sense, but if you aren't in the same city it can very easily turn into a PITA.
Posted on 8/26/20 at 9:18 am to baldona
you'll lose your homestead exemption. How much potential capital gains are in the home. How much will insurance increase/ will you manage yourself? do you want someone calling you at 4 am with a leaky toilet. how much of your wealth will be dependent on the real estate values in a single small market, assuming you are buying another house in the same area? do you like people (the type of people that will potentially be your tenant?
Posted on 8/26/20 at 9:52 am to BabyTac
quote:
Any downsides
All depends on your renters.
Posted on 8/26/20 at 11:14 am to BabyTac
Speaking of this thread, any books that are helpful on the ins and outs of renting? Like. Practical things.
Posted on 8/26/20 at 11:43 am to HailToTheChiz
Check biggerpockets
Posted on 8/26/20 at 1:10 pm to BabyTac
Struggling with this exact issue, though I am a year ahead.
We rented out our house when we moved last year and the lease is up at the end of November.
We're likely selling for a variety of reasons. First, while the house is in great condition, it was not meant to be a rental. It's in a great neighborhood. And I worry that continuing to rent it out will just put more wear and tear on it. Second, we don't see ourselves going back any time soon. Third, it's become a pain in the arse. The first few months were fine but since April, we've had to pay for a broken AC, issues with drainage in the backyard and just got a call yesterday that the oven is busted.
On top of it, being 900 miles away and on pins and needles this entire hurricane season hasn't helped.
Finally - the taxes. The taxes were already high and with not having a homestead exemption, it'll be worse this year.
We asked ourselves what would be the reason to hold onto it and agreed it would be purely emotional. I was never interested in being a lanlord and while the tenants are good folks, it's still been a pain. I can't imagine what would happen if we had crappy tenants.
So once the lease is up we'll go in and do some minor touch ups and then plan to list early next year.
We rented out our house when we moved last year and the lease is up at the end of November.
We're likely selling for a variety of reasons. First, while the house is in great condition, it was not meant to be a rental. It's in a great neighborhood. And I worry that continuing to rent it out will just put more wear and tear on it. Second, we don't see ourselves going back any time soon. Third, it's become a pain in the arse. The first few months were fine but since April, we've had to pay for a broken AC, issues with drainage in the backyard and just got a call yesterday that the oven is busted.
On top of it, being 900 miles away and on pins and needles this entire hurricane season hasn't helped.
Finally - the taxes. The taxes were already high and with not having a homestead exemption, it'll be worse this year.
We asked ourselves what would be the reason to hold onto it and agreed it would be purely emotional. I was never interested in being a lanlord and while the tenants are good folks, it's still been a pain. I can't imagine what would happen if we had crappy tenants.
So once the lease is up we'll go in and do some minor touch ups and then plan to list early next year.
Posted on 8/26/20 at 1:12 pm to HailToTheChiz
quote:
Speaking of this thread, any books that are helpful on the ins and outs of renting? Like. Practical things.
I started with Rich Dad/Poor Dad, Richest Man in Babylon, and 4-hour work Week. They aren't going to give you specific direction, but they'll change your outlook on pretty much everything
You might not need to read them, but at that time I needed a change in direction.
If you really want to dig in though
Millionaire Real Estate Investor
The Book on Rental Property Investing B. Turner
The Book on Managing Rental Properties B.Turner
Set for Life
Posted on 8/26/20 at 2:54 pm to AUGDawg
I thought you were only taxed on your gain if it was greater than 500k?
Posted on 8/26/20 at 2:58 pm to FMtTXtiger
Personal residence. Or a house you’ve lived in for 2 of the past 5 years. If it’s a straight rental (or does not meet above criteria) you have to pay any capital gains plus depreciation recapture if that applies to you
This post was edited on 8/26/20 at 2:59 pm
Posted on 8/26/20 at 3:11 pm to jimbeam
unless you plan on moving back I would say just sell. The most convenient rental property opportunity may be your existing house but its rarely going to be the most optimum return.
Posted on 8/26/20 at 7:15 pm to BabyTac
My uncle was renting out his 600k plus house, a tenant absolutely wrecked the place, they sued and got nothing out of it. Not worth the headache imo
Posted on 8/26/20 at 7:53 pm to TheWalrus
A friend rented out their 500k house in Alex. Renter got 3 months behind but refused to leave. Eviction started. They left the house the night before eviction. Left water running down and upstairs and disconnected both water heaters . House is a total frikin loss!!! SELL!!!!
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