When the time comes for you to move, whether it’s across town or across country, you have to decide what to do with your old house. The choices you face as a homeowner are: do you sell it and make a one-time profit from the sale or do you rent it and enjoy the benefits of having a monthly income?
How Soon Do You Need the Equity?
This is perhaps one of the most important questions you need to ask yourself. If you need the money soon, then selling may be your only option. But on the other hand, if you don’t need the equity now, chances are, you should be able to earn more by renting your home out. You need to factor in your current mortgage paymentif you have one, taxes, insurance, and the cost of hiring a management company.
Take all of this and subtract them from the value of the lease. If the result is in the red, then you should obviously not consider renting the property out. You are in it to make a profitif becoming a landlord ends up costing you money instead of making you money, there really isn’t any reason to go into business.
What Will You Do with the Money?
If you do sell your current home outright and realize a “profit” from it, you have to decide what you are going to do with the money. Will you invest in your next home, look for a 1031 exchange? Of course, if you decide to go ahead and take the cash out, you could be liable for tax penalties you have to consider.
On the other side of the coin, if you decide to go down the road towards becoming a landlord, over time, your rental home is going to appreciate in value. Here again,you could be facing a number of tax issues.
Who Will Take Care of My Home if I Lease It?
Then there is the question of who is going to take care of your home once you move out and your new tenant moves in? Trying to manage the property, take care of repairs, emergency calls, damage, bad tenants, and more, can be very challenging and time consuming. It can far more difficult than you realize and end up running you ragged.
The other optionis to hire a property management company. For a monthly fee, the property management company will take care of all the above and more. On top of this, they take care of keeping the house rented and the rent collected. Each company has their own selection of services and prices.
Many landlords start out as homeowners looking for a way to get the most out of their family home as they move up or out. Done properly, investing in rental properties is a great way to build up a healthy retirement portfolio. Keep in mind that areas like San Diego are experiencing a shortage of available housing, which is steadily driving rents in a steady upward spiral. There has never been a better time to convert your home into a rental unit and cash in its full potential!