self-managing landlord
Should I Rent or Sell My Home?
Wondering if you should rent your home, or sell it? When it comes to understanding all of your options, and their long-term financial impact is...
When someone is considering renting out their home, they are likely considering other options such as selling the home as well. Although there are pros and cons to both renting out your home and selling it, there are some clear benefits that we believe make renting it out the best option for most home owners. Read below to learn more about why you shouldn’t sell your family home.
There are tax benefits to keeping your home.
Another benefit that may not be considered at first, but is arguably one of the most beneficial, is the tax benefits you get when you rent out your home, or become a landlord.
Individuals who are renting out their home qualify for tax deductions that the typical homeowner would not qualify for. For example, if you can receive write offs for maintenance payments you had to make to keep the home in great condition for your tenant. It is also deductible if the tenant does not pay for gas and electricity, and the property owner does. Additionally, any kind of legal fees can be deductible if an issue arose that required it. Mortgage interest is also tax-deductible.
The depreciation of the asset value on a rental is a big benefit to the owner. The IRS typically allows you to depreciate the asset over 27.5 years. In our current climate, there is talk of raising capital gains taxes. This will be a deterrent to selling, as paying additional taxes is often an unattractive option. While we can never know for sure what will happen, things do seem to be moving in that direction.
You can continue to allow for property appreciation.
When you choose to rent out a home instead of selling it, you are able to allow the property to continue to appreciate in value. This is often a big incentive to our clients who own houses in California. The California market has continued to increase in value and, therefore, once a home has been sold, it is unlikely that a similar house could be bought at the same price again. By holding onto the home, the home owner is able to retain that value.
You don’t have to worry about the day-to-day, but can still benefit from rental payments each month.
Depending on when you bought the home, what you can rent your home out for each month, and other factors, you may be able to cover the cost of your mortgage payments, while also experiencing a positive cashflow.
A common reason for those that opt to sell their home is that they do not want to responsibility of being a landlord and managing day-to-day concerns. By hiring a property management company, you have the potential to benefit financially as stated above, and you remove any day-to-day concerns with the help of our experts. We take care of renting out and advertising properties, can handle getting the property ready to rent if there are any maintenance concerns, take care of any maintenance issues that arise while the tenant is residing in the home, and will ensure that it stays in good condition. By hiring a property management company, you will have peace of mind that your property is in good condition without getting into the weeds.
You are able to retain the asset.
When you choose to rent out your home instead of selling it, depending on your specific situation, you have the potential to continue making money each month. A part that is not often considered is that you are also making money, in a way, due to the increased value of the home over time. You are always able to sell the home at a later date, or have it to fall back on if you want to move back into it once a lease ends or a tenant moves out.
In cases where the home is being managed for a family member who is no longer able to care for it, keeping the home may be a piece of retaining memories of a family home. It can be a great option for those who would like the home to stay within the family, but do not intend on living in it presently.
You have something to go back to.
Especially in the cases of clients who are moving out of state, a concern is that they would like the option to move back to California someday. Because of the current trajectory of home prices in California, and how much they bought the home for compared to how much it is worth now, they may have concerns about affording moving back. By renting out your home, you do not have to worry about not having a space to come back to, if you ever choose to do so. Depending on your situation, you may not be financially burdened with the mortgage payment, and potentially can even make money due to the rental payments each month. This is a very attractive option for many of our clients who feel uneasy about the permanence of selling.
If you are interested in learning more about how renting out your home, or family home, could be the best option for you, reach out today by filling out our contact form here, or calling us at (805) 267-1158.