Sell vs Rent

The only thing certain in life is uncertainty. In the world of business and commerce this is especially true. Sometimes in good ways, other times in bad ways. Sometimes it means getting a promotion, which is typically a good thing. Unfortunately, this sometimes means that jobs get terminated or transferred. Familial status changes. When life circumstances change and a move is needed, a home owner is faced with the dilemma of renting out their home or selling it. Should I rent it out or sell? The answer to the question is...

Renting

Renting out your home allows you to reduce the amount of monthly investment in a home. Sometimes your rental income can be greater than your monthly payment in a property. The result is called "Cashflow". The goal of renting out your home is to continue to pay down the mortgage while the property values increase(hopefully).

Pros: The main benefit of renting our a property is the decreasing of the mortgage as property values increase (the difference between mortgage and property value is called equity). This growth in equity will compound in time as rental rates increase, mortgage decreases, and property values go up. Renting out a home can be either a short-term or long-term investment.Renting out a property can be very profitable over the long-haul...a great way to plan for retirement.


Cons: Managing rentals can be tedious and time-consuming. Finding tenants, collecting rent, repairs, and evictions are a few of the numerous tasks required to manage rental properties. The management of rentals can be difficult to impossible in distant locations. Where management companies can be hired for finding tenants and managing the rents and repairs, it can be expensive or impractical to hire out these tasks. In areas of high-growth, rental rates can be significantly lower than mortgage payments requiring a large monthly investment by owners. Tac on a property manager and the investment can be impractical.

Selling

The ultimate goal of real estate is to be able to sell the property for more than you owe. Cashing out the equity of a home is the goal for many people. Whether it's this year or 20 years from now. Selling a home is the reaping the benefit of owning a home. You might call it "Cashing out."

Pros: The first and highest benefit of selling a property is receiving the equity from the property and disposing of the investment. No longer dealing with the issues required to maintain real estate. The current tax laws are very friendly to sellers who have occupied real estate. The current laws provide tax exemption to capital gains for owners that sell real estate that has been their residence.*

Cons: Selling your home eliminates any opportunity to realize any future gains in property values. As Charlotte in general has done very well with increasing property values, some people may find themselves "up-side-down"...meaning that they owe more money than their home is worth. Through whatever means that has happened, it may be necessary to pay money to dispose of the property in this situation. Selling a home can be fairly time consuming. It typically takes about 120 days to sell a home. Sometimes it is less. Sometimes more.

So, should you rent or sell? Well, that's up to you. Different people do the same thing for different reasons. And, different people do different things for the same reason.

Taking a look at your equity position in your home is a good first step in deciding what to do. Then you may want to study the rental rates in your neighborhood, the property value history, current market trends, and new developments that may hurt/benefit.

If you are interested in analyzing your current situation, I would be happy to meet with you to discuss. Please email me at tjmccollum@bellsouth.net for more information.


*Please consult an attorney and/or an accountant to verify you are eligible for tax exemption