How do you decide if someone should sell or rent their home? I was recently promoted at my job and we’re scheduled to move to Denver in about two months. Do you have a set of questions we can ask ourselves that will help us know if we’d be better off renting or selling? We’d really appreciate any guidance you have to give!
Derek, Grand Junction
Congratulations on your promotion! A promotion generally means there are good things ahead for you and that is exciting. There are so many things to consider when you are deciding whether it is best to rent or sell. I will give you a few questions to ask yourself and these should help you evaluate which decision is best for you and your family. Keep in mind this is just the tip of the iceberg. There are countless other things to consider, but in my opinion these are the biggies. I would suggest to focus on what could go wrong and what that outcome would look like, not making the assumption that all will be easy peasy…..most of the time rental properties are not just smooth sailing. Prepare for the worst and pray for the best, that’s my life motto! That may sound like a Debbie downer, but I prefer to be pleasantly surprised with an unexpected positive outcome than caught with my pants down because I did not properly prepare for the unanticipated.
1. Are you cut out to be a landlord? Some people are and some are not. You have to accept that your renter will not take care of your old home as you did. When you are done renting it, it WILL NOT be in A-1 condition and for many to-be landlords this one item proves more stressful than some can handle.
2. Will the property cash flow and if not, can you afford the shortfall it creates month after month? Remember If your mortgage is $1,600 per month and you can only rent it for $1,300, you will be coming out of pocket $300 per month (plus maintenance) and that will quickly add up to over $4000 -$5000 per year. Is this shortfall something that your budget can absorb? Can you afford the payments in full if it sits empty for a month or two or three? If your answer to this is “not really” or “we can, but it would be a stretch” then I might suggest the rest of the questions don’t matter and you should likely sell.
3. If your renter does not pay or is constantly late with their payments, are you built to handle conflict? Do you have the personality to evict them? Take this the right way, but some people are just too nice to be landlords. Renters can be like kids, if they don’t ask they won’t get and when they get the answer they don’t want to hear, they will ask again hoping that your answer has miraculously changed. Even the most dreamy renters can come across hard times and need to be evicted. Evictions can take time and if you are evicting from afar, can be very time-consuming.
4. Do you have the time to manage a property from out of the area? Renting a property out will take extra time, some more than others. Answering phone calls, scheduling maintenance, repairs, property checks…all this takes time, and doing it from afar can be really risky and frustrating. Trust me, the sewer will back up the day before that Bahamas vacation or your daughter’s wedding in Nashville. There is a universal law that has demonstrated time and time again that if I have something important I am planning/doing, an issue will present at the most inopportune time. It almost never happens on a quiet Sunday afternoon.
Remember, not all renters are created equal. Some are easier than others. If you decide renting is the right choice, but don’t want the potential headache you can always hire a property manager. Trust me, it can be the best 10% you ever spend! Property managers offer great peace of mind, especially when faced with the prospect of being a landlord from afar. Even though renting might be an appealing option, don’t underestimate the upside to just selling and moving on without lingering hassle.
If you decide to just sell you can walk away and move on and that can be huge! If you don’t plan to come back, then you are just prolonging the inevitable, and in many instances just ripping the band-aid off is the best option…even if it is painful at the time!
Don’t undervalue the freedom of being able to leave the old house in the rearview mirror. If you have equity in your home, you can use that equity for a down payment on your next home or purchasing a rental property in the Denver area where you can keep an eye on it. Selling also relieves you of the stress of dealing with renters and the maintenance of a home that you are no longer living in.
Honestly, my experience has shown that selling is the most popular choice if you are moving out of the area. If you do decide to rent it out, I would highly recommend you hire a property manager and NOT go the “do it yourself” route. Best of luck and congratulations on the new gig and Happy New Year!
The Kimbrough Team