According to online real estate database Zillow, the housing market in mid-central Florida remains steady, with an approximate 4% increase predicted in sales over the next year. It’s not a bad time to sell your home, but it might stay on the market for awhile before you find a buyer willing to meet your price. That leaves you with a choice: should you rent or sell your home when you get ready to move? This article looks at pros and cons of both sides.
Factors in Your Decision
The decision making process needs research. There are a variety of components when making the complicated decision to rent or sell your home. Consider this:
Do you need the money from your current home to pay for your new home?
If you need the money from your current home to buy your new home, the decision is already made: you need to sell your home. But even if you can afford to buy your new home without selling your current home, ask yourself these questions:
- How does the amount you can get from selling compare to what you still owe?
- How much rent can you get?
- How much money will you have to spend to make your home appealing to a renter?
- Can you afford maintenance costs on a rental?
- Do you have a landlord personality?
Your mortgage exceeds what you can sell it for
Homeowners with an underwater mortgage need to do some calculations about whether to rent or sell home. An underwater mortgage is one in which the amount of your mortgage is more than what the home is worth. Mortgage experts recommend renting a home, assuming you can handle the other costs involved, if your loan-to-value ratio is less than 110%. This is relying on the fact that prices in most housing markets appreciate in value at about 3% each year. For homes with a higher loan-to-value ratio, over 110%, you will probably be better off just cutting your losses. Selling it for less than you owe is called a short sale. Though it hurts the pride and the pocketbook, it gets you out from under the high mortgage payment each month and lets you start fresh.
Rent or sell your home by the numbers
You need to check with realtors and investors, statistics from the Chamber of Commerce and by looking at classifieds in your area to get an accurate idea how much you can reasonably charge for rent. If you have at least two bedrooms and two bathrooms and are not on a busy street, you are in a very good position to find willing renters. But this is just the first important number you need to look at when you are trying to decide to rent or sell home.
Other crucial financial information includes:
• mortgage costs• property taxes• maintenance costs• the state of the rental market• upgrading to make the house competitive in the rental market• maintenance and repair costs after renting it• money required to get the house ready each time you get new renters
The money you get each month should pay your monthly mortgage bill, property taxes and maintenance costs. You need to be sure you can cover those thousands of dollars over the course of a year renting out the house. In addition, you need to look at the prognosis for the local rental market. Is it holding steady? How is the economy? A helpful tool is an online rent or sell home calculator.
Bankrate.com recommends finding a real estate agent who is familiar with rentals to give you an informed estimate. The rent you charge is based strictly on the market. It has nothing at all to do with how much you owe on your home, the taxes and the upkeep. Unless these numbers balance out, you could end up seriously in debt if you rent the house. You may be able to increase the amount you ask by upgrading the amenities in your home.
When you sell your home, getting rid of clutter and a new paint job is often enough to sell. Much more work is necessary if you want to rent your home. Renters look for new carpeting and drapes, new paint, attractive bathrooms, a well kept yard that requires limited upkeep on their part, a fully equipped kitchen and working, if not new, appliances. If your home looks shabby and not well cared for, renters will move on to the next listing. It can take a substantial amount of money to upgrade your home to acceptable standards, especially in a competitive market.
After tenants move in, you are still responsible for all repairs and upkeep. This means doing it yourself if you are in the area, hiring a handyman for basic repairs and calling a plumber or electrician for major fixes. This takes its toll in money and time for a landlord. Check the maintenance costs over the last five years for your home to get an idea what can go wrong and how much it will likely cost to fix. Add in the money you currently spend on upkeep. Remember that each time a renter moves out, you will need to replace carpeting, repaint certain rooms and deep clean the entire house. This additional cost can tip the scales when deciding to rent or sell home.
The Landlord Personality
If you enjoy working around the house, being a landlord might be the perfect second job for you. This works if you live in the same town or close by. But if you are moving to another state, you will still have to fulfill your landlord duties. This means hiring all the work done, which is an added expense. It also means added frustration because you can’t be present to oversee the work. Since you are paying for it, it is natural that you want to be sure it is done correctly and you are getting your money’s worth. This can require additional trips to the area to inspect it regularly. It also means long-distance phone calls from upset renters if the plumbing needs work or a window gets broken. Renter problems don’t happen on a schedule. Following Murphy’s Law, you will end up with calls on weekends and at night. Can you handle that kind of intrusion in your life?
If you don’t want to take care of the nuts and bolts of renting out your home yourself, you can hire a property management firm for the day-to-day work, including collecting the rent. They are experienced and know where to find handymen and contractors quickly, 24 hours a day. But this convenience comes at a price, often a big bite out of the money the renter is paying.
Check with other one-home landlords in your area to discuss the pros and cons of renting your home. Find out how they feel about the emotional toll of dealing with renters, how much time it takes to work on the home, and types of unexpected problems. Don’t end up renting your home out because you think it’s the best financial decision if you don’t have the right temperament for the work.
To rent or sell your home is both a financial and a lifestyle decision. It is wise to research the numbers, check with a realtor experienced with the market in your area and put together a profit and loss statement. When making the lifestyle decision, do a mental check of your willingness to meet the requirements of being a landlord.