Are you thinking about selling your Portland Oregon Home but you’re not sure if you should wait, and rent it out? If so, you’ve come to the right place!
The real estate market is on fire right now, as homes in Portland Oregon are selling for far about their list prices but the rental market is also hot as well, and many people don’t know if they should sell, or rent their homes out.
In this article we will answer this question and offer you reasons why you should consider selling your home now vs. renting it out.
Sell Vs. Rent – Which is The Better Option?
Let’s face it, nobody likes to miss an opportunity, and this is why most homeowners are struggling right now with the decision to sell or rent their homes.
Selling is a great option because you could sell your property at the top of the market, but the big question is have we reached the top? Or could prices go higher?
The same question could be asked about renting, you could rent your home now but will there continue to be a demand for properties like yours? Or will demand slow down over the next 12 months?
Reasons To Rent Your Property
Of course, we don’t have crystal balls, but trying to gauge where the market’s going is not impossible. Take a look at the growth of your city—is it moving away from you or toward you? Are businesses moving into your area? Are homes being fixed up or left to rot? You can’t know with 100% certainty, but by analyzing the current trends in your market, you can make a more informed decision on what to do moving forward.
All of this information will help you determine what the future will look like and how your neighborhood’s value will increase or decline. Besides, it makes sense that buyers or renters want to come to an area where new, exciting things are happening. If you aren’t sure or want a more seasoned opinion, talking to a real estate agent could be a great option.
Listen, no one will judge you for loving your home. With such a huge investment, we’d hope you’d at least like it. So if you’re hoping to come back to it one day, renting may be the best of both worlds for you. That way, you still own the home, and you’re able to plan for a future with it while in the meantime renting it out for passive income.
It may sound funny, but it’s true. If someone else is paying you rent to live in your home and you’re not living with them, it makes more than sense to charge them enough to cover your mortgage. For many people, paying one less bill helps eliminate stress while allowing them to keep the property.
We’ve discussed reasons to rent out your second home. So now it’s time to go over why selling may be the best option.
Reasons To Sell
If you would make a profit by selling, consider your return on investment (ROI). For example, if you could make $100,000 in profit by selling your house and achieve only $1,000 per year in cash flow, that’s a 1% ROI. It’s better to take that $100,000 profit and invest it in something else that could produce a higher return.
Keep in mind that tax benefits for homeowners typically only count toward the primary residence. Unfortunately, you can only have one of those at a time, and since we’re talking about a second property here, those benefits wouldn’t help you out.
Also, consider how much you pay for both homes. For many people, it would be rough to be able to maintain them both. And depending on where you live, you could be paying a lot in property taxes alone. Think about the taxes you’d have to pay on not only your primary but your secondary residence. Do the math even if you don’t want it, and make the best choice for yourself.
Beyond your mortgage payment of principal, interest, taxes, and insurance, you’ll incur plenty of other expenses if you rent:
- Property management fees
- Capital expenditure and repairs
- Administrative, bookkeeping, and miscellaneous
- Other fees depending on the property and where you live
The 50% rule states that your expenses will run around 50% of the rent—not including any financing like principal and interest that you pay. If the rent is $1,000, and your mortgage payment (principal and interest) is $400/month, you can expect roughly $500 in additional expenses, leaving you with a cash flow of $100/month.
Be honest with yourself and your property. Does it serve you best as a rental? Or invested elsewhere? The last thing you want is to keep your old home as a rental property, have it cash flow poorly, and then you throw your hands up and say, “Rentals are not for me.” These kinds of investments are both an art and a science, and just because a property made a good home for you, it may not make a good rental.
Run the numbers. If you like what you see, move forward. If not, sell the property and invest the proceeds elsewhere. And if you decide that being a landlord is not for you, you have other options for investing in rental real estate. You can buy it and hire a property manager. You can become a silent partner and have your partner handle all management. Or you can step back even further and invest in private notes or real estate investment trusts.
Of course, this may not be the case for you because the home you already own would actually be a great property to use as a rental. It’s also possible that you don’t feel confident in your ability to buy rentals that will cash flow in your market. Regardless, these are all questions you will need to ask yourself before deciding on keeping or selling your second home as a rental.
Contact Rent Portland Homes
Still have question about if you should sell or rent your home? We can help! Contact the property management team at Rent Portland Homes, today, by clicking here to connect with us online.