Home Selling in 97229>Question Details

Yiyi, Home Seller in 97229

Should I rent out my house or sell it? I am relocating and currently own a home at Portland, OR. thanks!

Asked by Yiyi, 97229 Fri May 30, 2008

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11
Should one rent out a house or sell it when relocating to a different place? Its a very good question.
I would recommend owner to consider the following:
1) Market price - Is it must to sell your home? Given we are seeing a buyers market, you might be able to get sale price congenial to current market conditions. Will you be comfortable with current market prices?
2) Equity in house - How much equity you have tied in house? Do you need the money from equity immediately? If you have dire financial need and have equity tied up, you might consider selling.
3) Managing rental - Can you manage your home remotely if you put it on rent? Renting home often requires attention from owners to address If not, can you find a rental management company to manage your home?

I hope these 3 points help one decide on selling vs. renting.

Best of luck!
Manisha Jain, Realtor
http://manishajain.weebly.com
1 vote Thank Flag Link Wed Jun 1, 2011
Yiyi-

There are a few basic questions to ask before you get started and the other writers have touched on those:

1) Do you need the equity in your home to buy a your next home? If the answer is yes, the answer is "sell".
2) Are you OK with the business of investment real estate? There are risks and rewards to the business. If you're not comfortable with some degree of risk, the answer is "sell".

If you're ready to proceed with renting, find a good rental management company and a good CPA to help you sort out the financials.

First, get the financials. The basic information is: how much equity you have in your home and what kind of return can you get on that equity.

To get information on your equity, you'll need a realistic idea of what you would net on the sale. Find a few real estate brokers familiar with your area and get them to do a Comparable Market Analysis for you. Encourage them to be brutally honest with you, take the lowest suggested list price and allow a "fudge factor" on price with which you're comfortable. Make sure the figure you're working with is your net proceeds after closing costs.

Gather rental income information. Have some rental management companies give you proposals. Ask them about vacancy rates. Read the classifieds and visit rentals in your area. Then reduce your gross rental income by a factor that you feel is OK for your comfort level.

Take all these figures and meet with your CPA. There are a lot of tax ramifications to owning rental property. Some very good. That's why there are some wealthy landlords. And there are tax consequences to watch out for. Your CPA will know these and how they may impact you.

You make money on an investment property in 4 ways:
1) Cash flow (your rental income minus expenses) (are rents rising?)
2) Depreciation and its tax benefit to you (get help from your CPA on this)
3) Equity building (your tenant is paying down your mortgage balance) (It IS a fully amortized mortgage, right?)
4) Appreciation (your opinion of where Portland real estate prices will be when you finally sell)

Your CPA can help you do a spread sheet on this. There are a number of simple Excel programs out there you can use. Then, look it all over and compare it with the return you think you would get on your net proceeds of a sale if you were to invest them elsewhere, including other investment properties.

Then, take a deep breath and decide if you're ready for the risks and rewards of real estate investment!

May whatever you decide be the best for you!

ED
1 vote Thank Flag Link Tue Jun 10, 2008
Rental properties can be a fantastic investment- especially in a time when investment accounts and 401ks are not paying much of anything.
I would say if you can swing keeping the property (making sure you have enough for vacancies, mortage, insurange and taxes as well as some maintenance expenses), its well worth considering. Another option would be to refinance to pull money out for a down payment on your new property. Keep in mind, however, that most lenders will only consider your rental as an investment or income producing asset if you have at least 25% equity in the property. The market prices are relatively low right now, so if you are able to hold on to this property it could be a good source of future revenue/income down the road. zilpy.com is a great website that will allow you to see what your home could rent for.
Derek Kline
Summa Real Estate
503-753-3463
Web Reference: http://www.zilpy.com
0 votes Thank Flag Link Wed Jun 8, 2011
I would say it depends on the market for your current area. Contact a local listing agent and have them do a general CMA (Comparable Market Analysis) on your property....they can give you a general estimate without needing to visit the house just by looking and recent homes that have sold that are comparable to yours. I say if you can sell it and come out okay, then sell it because being an out of State landlord could cause some headaches. However, if you don't come out okay...then rent it...you can save a headache by hiring a property manager. Good Luck!
0 votes Thank Flag Link Sat Nov 6, 2010
Yiyi, I just learned that there is a new tax law about turning your house into a rental and what the new law says. Check with an accountant to see what it might do to your tax liability issues when you sell. Good Luck
Tom Inglesby, Broker, ABR,CRS, CLHMS
RE/MAX EquityGroup Inc
503-495-5416
0 votes Thank Flag Link Mon Sep 29, 2008
Quick questions
How long have you owned it?
What is your interest rate on the house?
Where are you moving to?
Do you need to sell to buy in new area?
Do you want to be a landlord?
Is the market turning around in Portland quickly so you can recover your money in a couple of years?

If you have equity and you could cover your payments and you don't need to sell to buy somewhere else I would say rent. Most sellers don't have any idea how hard it is to be a landlord in another city. You will need a property manager to handle the calls that the tiolet broke and some one needs to come and fix it along with the damaged floor. Parts of Portland are flat and other parts are sellign quickly so it depends where you live and how fast it will take to sell. Do you plan on moving back to Portland in the next 5 years might be a reason to hold on to this house. But I would probably say sell if you have owned the house for a while. Rates are low so buying in a new city with low interests today really makes sense. The rates are just about the best they have been in the past 50 years and it rates go up 1/2 point on a $200,000 mortgage then home values need to drop 10% to stay even so clean up that house and make it sparkle and price it agressively and it will sell.

Tom Inglesby, Broker
ABR,CRS,CLHMS
RE/MAX Equity Group
503-495-5416
Portland, Or 97239
0 votes Thank Flag Link Mon Jun 9, 2008
yiyi,
Most of the previous answers have a lot of value but none of them really tell you the right way to make the decision. Generally speaking personal property does not make a good rental property because typically it is to high in value to make financial sense. You need to way what the equity you have in the home would do in another investment compared to if you rented your home out.
If you put your home on the market for $300K and you feel that is reasonable value to ask then in order to make it a reasonable investment you would need to be be able to rent it for about $2,500 per month. If you have a $200K mortgage then you would have a $1200 per month mortgage leaving about $1,300 to cover vacancy (5%-10% annually ....$250/month), mantenance (5% annually $175/month), and other expenses and utilities. You would be doing well to walk away with about $500 and that is if there are no problems and you can actually rent it for that amount. So now you need to determine if you think your $100K equity could make more money in another investment.
If you want to be a land lord and this property will give you a good return on the investment then yes you should keep it. If you are considering renting the property hopeing to get more for it next year and especially if the rent is not covering the exenses then I will tell you that you can get more for your money by cutting your loses and selling out. It make no sense to through more money into a property that is not making sense just so that the rent will cover the payment.
I do think you need to gather all of the information: what will the property sell for, how much equity would you have if it did, will that money give you a better return somewere else, what could you rent it for, what would the expenses be, and there are probably more. Landlording long distance can be very difficult and expensive if you are not prepared for it.
The last question that I would have you answer is if you are trying to get an certain amount for the home and it would not sell for that by not selling youare esentially buying the property yourself to make it a rental that does not make sense income wise when no one else was willing to buy it, so why would you over pay for a property that no one else would buy?
I do agree that if you can rent it and it does make sense then do it, don't sell if you don't have to. But don't hold onto the property hoping the maket will give you abetter return in the next year or two because the long term average appriciation, which we will likely be below for the next few years, is not agood rate of return. Appriciation should almost never be considered in whether a property should or should not be kept unless you are into risky speculation, it is the icing on the cake.
I am not in the Portland market but I would be happy to give you some unbias answers if you would like to give me a call. I can also refer you to an agent in the Portland area that understands this question as most agents really don't.

Good Luck,

Ron Rogers
Web Reference: http://www.KlamathHome.com
0 votes Thank Flag Link Mon Jun 2, 2008
Yiji,
Despite some of the answers here, rentals can be a great investment no matter what the market is doing. It all depends on what your numbers look like. Appreciation is definitely something you have to take into account, but it should be the icing on the cake for your investment, not your sole money maker. There is also the tax sheltering benefits of rentals, debt reduction, and cash flow (depending on the rent vs your payment). If appreciation were the only factor, there wouldn't be any investors making money in flat markets. Obviously you wouldn't want to buy properties if you expect values to drop dramatically. But if you have already built in equity it may make your numbers work to hold the property. If you have any questions on how to double check your numbers, give me a call.

In regards to selling: If you don't HAVE to sell, why put your home on the market to compete with short sales and foreclosures? We have a glut of inventory and the homes that are selling are the ones with extremely motived sellers. So again, if you don't have to sell, don't waste your time putting it on the market. If you DO Have to sell, then by all means, do it right. Price it aggressively and find a broker who will market the h*ll out f the property.
0 votes Thank Flag Link Fri May 30, 2008
I would sell it Yiyi;

At this point we are all just trading dollars. Portland has been hurt less than most markets.

If you can get some equity out do it. Take that down payment and go recoup in the place your moving. Expect thes eprices to stay down for a while here. Renting only makes sense if the market will come back sooner than later.

In this case it is going to be later. So I say sell. Rentals make no financial sense here and the place will likely get beat up.

Sell.

Period.

Good question.

regards;

Dirk Knudsen
Re\Max Metro
Oregon's #1 Rated Team
Re\Max Hall of Fame
503-799-8383
Web Reference: http://www.nwhomecenter.com
0 votes Thank Flag Link Fri May 30, 2008
Hi Yiyi,

Great Question and I've actually been working on that question with several people in the relocation program for a large automotive company.

These are the questions that I ask them and I will pose to you. By the way all these questions you should discuss with your licensed Accountant as every situation is different.

1. Have you have owned your property longer than two years? If yes, you probably qualify for an untaxed gain on the property for upto 250K or 500K jointly. A Realtor can help you with a value range of what it can sell for today if they were to list it and a licensed home appraiser can give you a value of what your house is worth.

2. If you decided to relocate and keep the property do you have someone that you can trust to manage the property, collect rents and make decisions as if it were a property of their own? (Problems occur on a property all the time. A great property manager needs to be on call to manage day to day operations and emergencies, these people charge anywhere from 8-12% of the monthly rent) My best advice is hire the best you can find as the stress of owning from a distance can consume you.

3. Will you be renting it for more than 3 years? (typically, if you rent the property for more than 3 years of the last 5, then the property can no longer be considered for a tax free gain upto 250K or 500K jointly when you are ready to sell it).

4. Does the property have a large Loan on it that would make it cost prohibitive to rent? (If so, can you put more money into the property and refinance the loan?)

5. If the property sits vacant or if the tenant decides to cease making rental payments and you need to evict the tenant could you maintain your monthly payment, taxes and other property obligations? Are you able and ready to repair the property of damage from a tenant? (A client of mine has just completed this expensive process. She said that she was lucky she had 6 months of payments in the bank as it took 6 months to evict and return the property back to normal, she is now selling it and it at a loss).

6. Finally if you are relocating for a company generally they offer a package that compensates you 5% above and beyond moving and selling expenses to sell it yourself. Check with your relocation coordinator or HR at your company to see if you qualify.

With all the being said, the rental market is great and can offer long term benefits and an opportunity for folks that are being relocated in a challenging market to sit tight on their investments while the market gets better. Being a landlord also has many legal obligations, responsibilities and financial risks. I would make sure to do your homework before you decide to make a move in either direction.

Best of Luck,


Brian Ramsay
Principal Broker
Realty Trust Group Inc

http://www.oregonstyle.com
0 votes Thank Flag Link Fri May 30, 2008
Hi-
It all depends on your situation. Before you can make the decision of selling vs renting you need all the facts:

1. What could you sell it for? (you would want a realtor..hopefully me (grin)) do a CMA (Comparative Market Analysis) for you. This would give you an idea of what it would sell for.

2. You would want to figure out what you can rent for. http://www.ziplfy.com is a great website that tells you the average rents in any given area. Will you be able to rent it for enough to cover your mortgage? If not, are you comfortable with paying a portion of the mortgage.

With this information you can better determine if it makes sense financially.

Next, you want to figure out how you will manage the rental. Will you use a company? If so, you need to consider their fees. If not, how are you going to verify that the people you get to rent are good paying renters? Also, how will you address problems that come up that need repair.

Renting from a distance can be tough- especially if you have never done it before. I recommend you gather all the facts first and then make an informed decision.

I would love to be of assistance. Feel free to call or email me.

Hope this was helpful!

Cathy

Cathy Mankus, MS, GRI
The Hasson Company
503-705-8795
cathy@cathymankus.com

Turning Houses into Homes
0 votes Thank Flag Link Fri May 30, 2008
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