When To Become A Landlord And When To Sell Your House
When To Become A Landlord And When To Sell Your House
Whether you’re moving into your dream home or need to pack up and get out of town fast (hopefully not because you’re running from the law), you have a few options. You can put your place in the hands of an experienced real estate agent or you can find tenants and rent it out.
You could be moving out of an Austin pad with exposed brick next to Hideout coffeehouse, a mid century modern in Palm Springs, an iconic San Francisco Victorian, a low ranch style in Phoenix, or a two story with a nice backyard. The style and layout of your home, its location, your personal financial goals, and the heat of the market in your area determine if you should become a landlord or find a real estate agent and sell as fast as you can.
Analyze Your Home Value and The State of the Local Market
To figure out which path is best for you, we’ve put together a list of thepros and cons of renting your homeand the pros and cons for selling it. First you’ll need to create a profile for your home.
Step 1: Figure Out How Much Your Home Is Worth Today
Online home value estimate tools can give you a quick and general idea ofhow much your home is worth. You need to have an approximate value of your home to get a ballpark of how much it might sell for should you choose to go that route.
Step 2: Conduct a Quick Comparative Market Analysis
We created a quick DIY (sounds fun, right?) way to figure out how your house stacks up against other homes in your area. Yourcomparative market analysis(CMA) takes the square footage, lot size, number of bedrooms and bathrooms, garage space and upgrades of your house into account. Then, you’ll compare these features of your home with those of properties in a 1-3 mile radius that have sold within the past 2-3 months. You can get a list of these properties on a website likeRealtyTrac.
To make it easy, all you have to do is create a chart that maps out: the address, the zip code, date sold, sale price, square feet, lot size, number of bedrooms and bathrooms, year built, and cost per square foot.
Your house value will be closest to the homes with the most similar lot size, amenities, and upgrades.
Step 3: Calculate How Much You’ll Make When You Sell Your House
Calculate how much you’ll spend to sell the home (updates, preparation, cleaning, homeowner’s association fees, property taxes, real estate agent commission, transfer taxes, attorney fees)
Figure out how much you have yet to pay off on your mortgage
Recall how much of a down payment you made when you purchased the property
Add these costs together, then subtract this number from the projected sale price you got from the online home value estimator and the comparative market analysis. If you’ll make money on the sale and the house can sell in the time frame you need it to, then it’s worth putting your place on the market.
In Short, You Should Sell Your House If:
If you can get fair market value for your home, sell in a reasonable amount of time (top real estate agents move houses off the market in about 65 days) and make a profit on the sale, then you should sell your home right now. Look at the state of the market in your area. For the market to be considered healthy, homes should consistently sell for above or at the list price.
If none of these criteria are true, becoming a landlord could be your best option.
How Much Could You Make As a Landlord?
Next you’ll weigh the pros and cons of renting your home based on the money you could make and the costs you’ll incur as a landlord.
Step 3: Consider the Costs Associated With Renting
Renting out your house comes with its own unexpected costs. The normal wear and tear of tenants means you’ll have to pay to fix broken front doors, faulty plumbing, issues with a washer and dryer, and whatever else pops up over the term of their lease. These small maintenance issues can add up, and just like if you were living in the home yourself you may have to address more serious problems like a roof update or foundation fix.
Other costs to consider are: your mortgage payment (obviously), property taxes, the cost of a property management company (if you don’t want to deal directly with tenants), and HOA fees.
How to find out how much of a profit you are likely to make each year, take the amount you’d make on rent. Then, subtract: expected vacancies, repairs, HOA fees, taxes, and your mortgage payment. You should break even or come out with at least a $1,200 profit for the year for the rental to be worth it.
Since your house will appreciate over time, you could consider taking a loss every month with the expectation that your house will sell for more in the long run and cover the money you lost. While this is one strategy, it is risky and based solely on the heat of the market when you do ultimately decide to sell. You should view your home as an investment property: you need to make enough money so that managing a tenant (and all that could go wrong) makes sense for you financially.
Ultimately, to Sell or to Rent Depends on the Numbers
After completing all the steps above, look at the numbers and decide which is the right decision for your situation. If your house could sell in your local market at fair market value for a reasonable price, then put your time into finding the perfect real estate agent, preparing your house to sell, and moving into your next place.
You should rent out your house if you can’t get fair market value for your home, you’ll lose money on the house, or you could make money on it by renting or keeping it as an investment property. If you can make money every month or break even and sell for more as the house appreciates, then renting is the right strategy for you.
Author:Jeremy Dysch Phone: 561-351-6843 Dated: July 17th 2017 Views: 187 About Jeremy: 4 BIG REASONS TO CALL Jeremy TO SELL YOUR HOME!
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