Should I Sell Or Rent My Home?

Should I Sell or Rent my Bend Oregon Home?Your current home is the first home you ever purchased but you are ready to move up to something a little more “comfortable” and now you wonder, “Should I sell my home or rent it?”  Here are some things to consider when searching for an answer to this question.

Would the listing description for your house be accurate if it said, “Good bones with shag carpet and olive green appliances?”  A house that is still stuck in the ’70’s isn’t going to command top dollar in any real estate market.  Buyers will likely see the decor and wonder if the decor hasn’t been touched in decades what else in the house has been neglected.  Tenants on the other hand can be willing to overlook questionable decor for a good house at a good price.  If you don’t have money or desire to invest in new fixtures that are outdated but work perfectly fine then converting your home to a rental might be the way to go.

What are they doing to my home?  Tenants won’t feel the same way about your house as you do.  Flooring will get stained or scratched, walls will get nicked and dirty, and landscaping will show signs of neglect.  If seeing your former home in less than pristine condition is going to cause angst and restless nights then you might be better off selling your home.

They say money isn’t everything.  That may be so but when it comes to buying a new home and converting the old one to a rental, money is very important.  You will need cash for a down payment on your new home, income (rental and wages) to make two mortgage payments and reserves to cover repairs and improvements for both homes.

The first step in the money equation is to talk to a Realtor® and  figure out how much the house you want to buy is going to cost and how much equity you have in the house you already own.  This will help you determine how much cash you will need to buy a new home and if some of that cash could come from your current home.

Once the value of your current home has been determined it is time to figure out how much it might rent for.  If your Realtor® also happens to own a property management company (Becky Seim, Preferred Residential) then putting a dollar amount on rent will be no problem.  Without that resource your best bet is to browse the local property management company websites, classifieds or Craig’s List for similar properties near yours.

Armed with all these numbers you are now ready to talk to your mortgage lender.  If the numbers the lender gives back to you suggest that keeping your current home as a rental is going to prevent you from qualifying for a loan for a new home then selling your current home is probably a wise move.

Taxes are money too.  You have enough money to afford two mortgage payments and a down payment on a new house but do you know how owning a rental affects your tax bill?  Talk to your tax preparer.  Know the benefits and drawbacks of converting a home to a rental.  will you be able to reduce your taxes or will the positive cash flow from your rental push you into a new tax bracket?  What will happen when it comes time to sell the rental?   If the tax implications of owning a rental meet with your approval then it is likely a good idea to convert your home to a rental.

Have a plan for property management.  You made it this far.  Now is NOT the time to think the rental will take care of itself.  It won’t.  If you plan on managing the property yourself, take the time to honestly answer these questions:  Do you have enough time?  Do you understand or are you willing to learn local landlord/tenant laws?  Are you tough enough to evict a tenant who isn’t paying rent?  Even if the tenant really, honest to God, pinky swear, promises to pay next month?  Did you Google “what you need to know about becoming a landlord” and read stories about both the good and bad of being a landlord?

About Dan Seim

Dan Seim is the primary contributor to Preferred Residential's blog. He has been writing about real estate issues that affect home owners in Bend and Central Oregon since 2011.

Comment using