Are you facing the decision of selling your home? Have you considered renting your home instead? Trying to determine the best course of action to take with buying or selling a home can be a challenge. It is important to weigh the decision carefully to make the best choice for your needs. Here are five important things to consider:
- Is the property a cash flow potential?
- Will you receive a high return on investment for selling?
- Tax law requirements, will you end up paying more to sell the home?
- Does the market value look promising or will it worsen?
- Are you willing to manage a property and handle tenants?
Many homeowners consider renting their primary residence when they would like to upgrade to a bigger home, move away for work, etc. A rental property can be a great source of income, but it can also require a lot of work from the property owner.
Cash Flow Potential
Look at the cash flow potential from the property. When the property is rented, the expenses must be deducted to gain an estimate of how much money it will generate in monthly income. Some of the expenses include:
- Management time
If the property will produce an income, it’s a good idea to consider renting it out. If the numbers you add up end up being in the red, it’s best to consider selling the home.
Return on Investment
Look up the market value of the home to determine how much profit the home will make if it sold today. Remember to include real estate agent fees as part of the figure along with closing costs and potential maintenance and upgrade costs. If the numbers come back with a small profit margin, keep the home for some time as the market value increases.
No matter what, taxes will always be around! Consult with a tax attorney and financial advisor when you are considering the sell or rental of your home. If you sell real estate and make a profit, you will be subject to a tax up to 20% in your tax bracket. However, sale of a home up to $500,000 for a married filing jointly couple can be excluded if this was the primary residence used for two of the past five years. Investors are not able to exclude the sale of the home on their taxes, so this is something to carefully consider.
Future Market Value
Renting or selling a home comes down to what the future looks like. If the location is desirable, will it continue to be desirable for several years? If the future isn’t looking great for the area, it may be wise to sell the property now and get out before the value decreases.
How will it be to manage tenants? Do you have a personality that enjoys doing this or would you prefer to hire a property management company? Many people are simply not cut out for all the work that goes into property management, so it is wise to leave it to professionals if you do choose to rent out your home.
Keyrenter Property Management in East Bay is here to help homeowners who are planning to rent their homes. If you would like assistance with property management, or advice on getting started, reach out to our team today!