Palmer Harned, Realtor®
Palmer Harned
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{ASK PALMER} “Should I Sell or Rent?”

Q: “I’m ready to move out of my house. But if I sold it at today’s market value, I wouldn’t make a significant profit (if any). Is it better to cut my losses and sell now, or hold on to the house and rent it out in the hopes prices will rise enough in the next 5+ years?”

A: I get this question a lot, especially now that the market has recovered from the housing crash, but not fully in some areas. People who have been waiting to move for years are now looking at their equity and exploring their options. The very short answer to this question is it is generally better to sell now, if that is your ultimate goal anyways. However, there are a few factors to consider:

  1. Can you comfortably purchase a new home without selling your current one? This answer will dictate the rest of your process. A lender will be able to help you determine your purchasing power in both scenarios.
  2. What is the absolute minimum you can walk away with (or are you even willing to take a loss)? Your real estate agent can tell you what your net profit would be at different price scenarios, to help you determine if walking away to start your next chapter is more important, or if making a certain profit is necessary.
  3. What is the average rate of appreciation in your neighborhood? If you are leaning towards renting out, the appreciation rate will give you an idea of how long it will take for your home’s value to reach a comfortable profit margin.
  4. Have you weighed the costs of having a tenant? It’s not as simple as whether the rental rate matches your mortgage payment, though that is an important factor. You will still be responsible for any condo or HOA dues. You will also still be responsible for any repairs, as well as fixing things up when a tenant moves out. And you’ll need to account for months when the home may be vacant without a tenant, as you will still be responsible for paying that mortgage.
  5. Are you ready to be a landlord? This is perhaps the most important question, which many people don’t seriously consider. Along with the associated costs, being a landlord comes with a whole host of responsibilities. Unless you hire a property manager (for an added cost), you are responsible for responding to tenant needs, making repairs, addressing emergencies, and taking care of everything at the rental home in addition to your new home. And unless you hire a real estate agent (for an added cost), you are responsible for finding tenants, screening them appropriately, and collecting their payments.

Your real estate agent, lender and other trusted advisers will be able to guide you through these questions and help you arrive at the best strategy for your personal goals.

Have a question for Palmer? Send an email to palmer@palmerharned.com.

 

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