{"id":2765,"date":"2023-07-06T13:19:22","date_gmt":"2023-07-06T13:19:22","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/07\/06\/do-you-sell-or-rent-your-old-home-its-the-movers-dilemma-in-the-u-s-s-roaring-rental-markets\/"},"modified":"2023-07-06T13:19:22","modified_gmt":"2023-07-06T13:19:22","slug":"do-you-sell-or-rent-your-old-home-its-the-movers-dilemma-in-the-u-s-s-roaring-rental-markets","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/07\/06\/do-you-sell-or-rent-your-old-home-its-the-movers-dilemma-in-the-u-s-s-roaring-rental-markets\/","title":{"rendered":"Do You Sell or Rent Your Old Home? It\u2019s the Mover\u2019s Dilemma in the U.S.\u2019s Roaring Rental Markets."},"content":{"rendered":"

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JOE RAEDLE \/ GETTY IMAGES<\/p>\n

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Some homeowners, especially if they\u2019re wealthier, don\u2019t need to sell their current place in order to move\u2014and an especially strong rental market is one reason why they probably shouldn\u2019t.<\/p>\n

\u201cDeciding what to do with your home is more than a math decision,\u201d said T.J. Williams, a financial adviser and regional vice president with Wealth Enhancement Group\u00a0<\/strong>in New York. \u201cThere\u2019s an emotional conversation to have about whether you want to be a landlord and about the risks and rewards of either choice.\u201d<\/p>\n

The hassles of being a landlord can be mitigated by hiring a property management company, Williams said, but that won\u2019t entirely eliminate the headaches or the risk of a lack of tenants in any market.<\/p>\n

In\u00a0Phoenix<\/a>,\u00a0an influx of corporations and their executives means there\u2019s a strong luxury rental market, said Sacha Blanchet, a realtor with Coldwell Banker Realty in Phoenix.<\/p>\n

\u201cLots of people decide to keep their luxury property as a rental if they\u2019re relocating because their mortgage payments, especially if they have a low rate of 3% or 4%, can be covered by the rent,\u201d Blanchet said. \u201cShort-term rentals<\/a> are also an option but there\u2019s been a big increase in mandatory fees in Phoenix for them and most homeowners prefer long-term renters.\u201d<\/p>\n

In the Tampa, Sarasota and St. Petersburg areas in Florida, demand is high and supply is low for luxury homes, including both rentals<\/a> and sales, said Liane Jamason, broker\/owner of Corcoran Dwellings in Sarasota, Florida.<\/p>\n

\u201cHomeowners can sell for a great price right now, often with multiple bids and over the asking price,\u201d Jamason said. \u201cBut there are plenty of professional athletes and millionaires from other states who are relocating here or want a second home but prefer to rent and get to know the area before they buy, so renting can be lucrative, too.\u201d<\/p>\n

Most people want to sell and be done with their property rather than take on landlord duties, especially if they can get a good price, she said.<\/p>\n

\u201cIf you own a condo, you should ask your agent to see how many units are available for rent or sale in the community,\u201d Jamason said. \u201cIf there are five others in your building for rent, you may not get the rental income you want.\u201d<\/p>\n

Responsibilities, risks and liabilities of landlords<\/h2>\n

Homeowners who become landlords need to take multiple steps to make sure they meet the expectations of potential renters, follow local rules and maintain their property to keep it rented and to hold its value.<\/p>\n

\u201cMaintenance costs are higher on a larger or nicer home because if you need to replace something, you\u2019ll want it to be of equal quality,\u201d Williams said. \u201cIf you have a pool and extensive landscaping, you\u2019ll need to pay for their upkeep because you can\u2019t usually make your tenants responsible.\u201d<\/p>\n

In some jurisdictions, you need a business license or a permit to rent your property, he said.<\/p>\n

\u201cYou need to hire an attorney to be certain that the lease protects your interests,\u201d Williams said. \u201cYou also need to review your mortgage documents and possibly contact your mortgage company to let them know that you\u2019re not using the house as your primary residence. In some cases, that could trigger a need to refinance into an investment property loan.\u201d<\/p>\n

Your homeowner\u2019s insurance policy also needs to be updated to a landlord\u2019s policy. Williams recommended purchasing an umbrella insurance policy for additional liability coverage.<\/p>\n

The biggest risk, Williams said, is that you won\u2019t have tenants for long periods or that your tenants won\u2019t pay. There are carrying costs such as taxes, insurance and maintenance even if you don\u2019t have a mortgage. He suggested setting aside at least four months of those costs in case you don\u2019t have a tenant.<\/p>\n

Property manager solution<\/h2>\n

Turning over landlord duties to a property management company may seem like the best solution but \u201cthere\u2019s no free lunch,\u201d Blanchet said.<\/p>\n

\u201cEven with a property manager to take care of routine items, you\u2019ll need to be alerted when something goes wrong and to oversee repairs or make decisions about whether to repair or replace things,\u201d he said.<\/p>\n

In addition, you\u2019ll pay a significant fee depending on the structure of your rental terms and the services you request.<\/p>\n

\u201cProperty management fees are typically 10% to 15% of the monthly rent,\u201d Jamason said. \u201cIt can be higher if you want the manager to take on more responsibility.\u201d<\/p>\n

For short-term rentals<\/a>, expect to pay 12% to 16% of the monthly rent, Williams said. In Phoenix, property management fees for short-term rentals<\/a> can be as high as 25%, Blanchet said.<\/p>\n

Capital gains and other tax implications<\/h2>\n

If your property has significantly increased in value since you purchased it, you\u2019ll want to consult a tax adviser before choosing to rent it, Williams said.<\/p>\n

\u201cThe capital gains tax<\/a> exclusion on a profit of up to $250,000 for an individual or $500,000 for a couple depends on the house being their primary residence for at least two of the last five years,\u201d Williams said. \u201cYou may have more of a financial incentive to sell rather than rent if you\u2019ve had lots of gain in equity.\u201d<\/p>\n

In some cases, you can replicate the capital gains tax savings through rental income, he said, but the longer you hold it, the higher your equity could be when you sell.<\/p>\n

Consult a tax adviser about the implications of converting a primary residence to an investment property, Williams recommended.<\/p>\n

Opportunity costs and potential profits<\/h2>\n

Homeowners should estimate their return on investment for a rental or a sale, Blanchet said.<\/p>\n

\u201cMany people like the idea of earning rental income and owning a property that will increase in value, but others prefer to take their profits now and invest them in something else where they think they\u2019ll get a higher return,\u201d he said.<\/p>\n

Jamason has seen greater interest in upscale rental property recently.<\/p>\n

\u201cMore people like the safety of holding onto real estate for the long-term now because of the volatility in the stock market and nervousness over the bank crisis,\u201d Jamason said.<\/p>\n

On the other hand, there\u2019s always a risk that property values could decline.<\/p>\n

\u201cWhen you make your primary residence into a rental property, you\u2019re deciding that this is the best use of resources,\u201d Williams said. \u201cIf it\u2019s in the right location and you find great tenants who pay on time, that could make sense. But all real estate is local, and you really need to consult a local market expert.\u201d<\/p>\n

It\u2019s also important to consider your decision in the context of your timeline.<\/p>\n

\u201cIf you plan to move back to that area and live in the house again or your kids may want it, that\u2019s a reason to rent it,\u201d Williams said. \u201cIf you\u2019re looking at this as extra income in retirement, then you may want to evaluate whether it makes sense to sell now and buy a different rental property that could be more lucrative or have a larger pool of potential renters.\u201d<\/p>\n

In a hot rental market, the pros of renting are more likely to outweigh the pros of selling, but it\u2019s always smart to take a step back and review all the ramifications of your choices.<\/p>\n

The post Do You Sell or Rent Your Old Home? It\u2019s the Mover\u2019s Dilemma in the U.S.\u2019s Roaring Rental Markets.<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

JOE RAEDLE \/ GETTY IMAGES Some homeowners, especially if they\u2019re wealthier, don\u2019t need to sell their current place in order to move\u2014and an especially strong rental market is one reason why they probably shouldn\u2019t. \u201cDeciding what to do with your home is more than a math decision,\u201d said T.J. Williams, a financial adviser and regional…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":2766,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2765","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2765","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=2765"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2765\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/2766"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=2765"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=2765"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=2765"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}