Planned or otherwise, the time to move will come, and one of the most important decisions you would have to make would be to determine whether you want to sell or rent out your home.
There is no clean-cut, universal advice as every homeowner’s situation is different. Making this decision requires taking the time to evaluate your circumstances, but the guide below can help you identify key points for consideration.
Determining your home’s value
Knowing your home’s actual value is the first step. Real estate sites often provide estimates, but because the market is always fluctuating, these are not as inaccurate. A more reliable source would be listing sites like Zillow where you can check prices of recently sold properties.
The best option would be to consult your trusted Realtor. They can provide you with a comparative market analysis detailing similar properties in terms of size, features, and location. This gives you an overview of the price range you are working with. Depending on the condition of your home, you may then evaluate whether your property can be priced near the higher or lower boundary.
You may also ask your agent for an estimation of your net proceeds once all transaction costs like the agent’s commission and closing costs have been computed. Ideally, the total amount due you should be positive. Whether the money you’ll be left with will be sufficient for your needs (e.g., debt payoff, house down payment) is the next consideration. If it is, selling may be a good idea.
It is important to note, however, that selling does not happen overnight. Expect to wait at least 2-3 months before your property gets sold. This means if you need to move sooner than that, selling may not be the ideal option for you.
Preparing to be a landlord
If you’ve decided to go down the route of renting out your home, don’t fret — this can be an advantageous choice, especially in a tough market. In fact, if you can afford to hold onto the property, it’s recommended that you do so. Unlike a sale, renting out does not bring in sudden wealth. However, it can provide a steady source of income every month and become profitable over time once you break even on mortgage payments and the property appreciates.
But being a landlord isn’t a walk in the park. It takes a lot of work and planning, but when done well, it can be rewarding.
Along the same vein of determining your home’s value, start with identifying the price point. Typically, landlords charge from 0.8% to 1.1% of the home’s value as monthly rent. Also, factor in the monthly costs of homeownership – including repair costs, taxes, association fees, and insurance – as well as the prevailing local market rates for similar properties.
Ideally, you would want to set aside up to 6% of the rent as profit, but this may not always be possible especially at the beginning. There may be periods of vacancies, big expenses (such as roof replacement), and the occasional non-paying tenants, Thus, it is crucial to set long-term goals and expectations for your property. This helps you gauge if you can hold onto the property long enough to get your return on investment.
Legalities and renovations
Once you are set on the price, make sure to cover all the structural bases legally required for rental properties. A real estate attorney can make sure that your home is up to safety and building codes.
After meeting all the legal requirements, you can then improve the physical appearance of your property to increase its appeal. Doing simple changes like repainting the entire house or mowing the lawn can transform the home and increase its chances of catching a buyer’s eye.
Hiring a property manager
If the work required to manage the rental property seems overwhelming, know that you can hire a property manager to take care of things for you. A property manager can work on your behalf, especially if you live far from the rental home.
As professionals, property managers can ensure that you abide by all the applicable codes and laws, speed up the search for tenants, and eventually handle the regular maintenance of the property. Of course, this service comes at a cost (usually at an average of 10% of the monthly rental). However, it can be worth the expense to avoid mistakes that may become costly in the long run.
Selling or renting out a home has its pros and cons. What you choose depends on your needs and preferences, but San Francisco Realtor Nina Hatvany and her team of real estate experts in Team Hatvany can offer valuable insights that can guide your decision. Reach out to the team at 415.710.6462 or send an email to team(at)teamhatvany(dotted)com.