Should you sell your home on the market, or hold onto it and rent it out?
For sellers in today’s market, is it a better idea to sell their properties outright or hold them and rent them out to tenants? This has become a common question lately, so today I want to share my professional thoughts.
To be honest, it depends. Everyone’s situation is different, so there’s no one-size-fits-all answer. That’s why it’s important to work with someone who will ask you tough questions like the following:
1. Is it a short-term or long-term property? In other words, do you see yourself coming back to the area, or is it more likely that you’ll rent it out long term? If you aren’t coming back, it would be smart not to hold on to it as an investment property. Buy something in an area where you can see yourself living long-term.
2. What are the tax implications? If you live in an owner-occupied property, you’ll likely be able to keep the profits from your sale instead of being taxed. However, if you turn it into a rental property, then it becomes subject to long-term capital gains taxes. Many people want to hold onto a property because they think it’ll continue to appreciate, but they fail to consider the tax implications of keeping the property—long-term capital gains taxes can range between 15% and 20% depending on how much money you make.
3. What’s the season of your investment life? In other words, how much time and energy do you have to devote to being a landlord? Consider whether you’d rather be an active or passive real estate investor.
“Let go of your pride and your ego—those can lead you to make bad real estate decisions.”
4. What type of asset is it? Is it a single-family home, condo, or townhouse? I’ve sold all of my big, single-family homes and reinvested that money into smaller assets like condos and townhomes because they’re easier to manage. When you turn over a tenant in a single-family home, there’s typically more maintenance involved since it covers the whole property, including the exterior and yard.
5. What does your gut say? As you’re assessing your gut feelings about what to do, be sure to keep your pride in check. Many people want to hold onto a property simply because they’re proud of what they’ve done with it, even if doing so doesn’t provide much or any benefit. The instant you decide to move, you need to start thinking about your property as an investment. Let go of your pride and your ego—those can lead you to make bad real estate decisions.
If you’re debating about what you should do with your property, it’s a good idea to speak with a professional real estate advisor, especially one who owns investment properties. We own between 20 and 30 properties right now, so we’ve been down this road before and would be glad to share our advice with you. Don’t hesitate to reach out to us with any questions you have. Hope to hear from you soon!
