Skip to main content

Rent It or Sell It

Jul 01, 2015 12:36PM ● Published by Glenn Allen

by Glenn Allen

Whether you're downsizing or moving up the property ladder in the Bay Area, you're faced with the same dilemma: is it better to sell your primary residence, using the equity to purchase the next place and maybe have a nest egg set aside, or should you keep the place and rent it out? In fact, this is one of the top questions I get from clients. I'd like to take you through some of the main advantages and disadvantages of using your current home as an investment, so you can make an informed decision before you take the next step.

Advantages

In the Bay Area, you already have a built-in advantage: the thriving job market, scarcity of multi-unit properties, and high cost of real estate add up to a strong rental market.

Here are some other points to consider:

·       Equity Appreciation In a typical scenario, you might take a cash-out equity loan on what has been your primary residence and use that money to finance a second home. Assuming the rent you collect equals the mortgage payment plus the property tax and hazard insurance, it's not costing you much, if anything, to own the home. Meanwhile, the rental is building cash value at an interest rate that, on average, has exceeded the equity market since 2000.

·       Positive Cash Flow If you're downsizing into a smaller home, the current home might be paid in full. In this case, any rent you collect can supplement your retirement funds. This sum may exceed the interest you'd get on the proceeds from selling the house and investing the money as a lump sum.

·       Hedge Against Inflation A primary advantage to using the rent from a real estate investment to supplement your retirement funds is that, unlike most cash savings, rental income adjusts with inflation because rents themselves go up with inflation. 

Disadvantages

Even in a prime rental market, there are risks and responsibilities associated with becoming a landlord. These considerations must also factor into your decision:

·       Tenant Vacancies There are no guarantees in the rental market. Any number of circumstances could lead to vacancies that drag on for months, forcing you to make the mortgage payments or lose passive income.

·       Unreliable or Destructive Tenants Having bad tenants can eat into your profit margin, particularly if you are forced to file an eviction notice or they cause damages in excess of the maximum amount they can be sued in small claims court.

·       Cost of Maintenance Ordinary wear and tear aside, you may need to pay for unforeseen damages to the property and to replace worn out or broken appliances. Although you can claim some expenses as a tax deduction, you should count on maintenance being a regular expense of investment property ownership.

As in most real estate crossroads, there are a lot of factors to consider.  When I meet with clients, my goal is to shed as much light on their options so they can make the most informed decisions. If you are considering renting your property, a great way to minimize the hassle is to use a reputable management company.

To find out more about converting your current residence into an investment property, please contact me at 925-709-1000 or visit www.TalkToGlenn.com. To read more articles like these, visit www.GlennCF.com.

 

Home+Finance Rent It or Sell It
  • Happy Hour & A Half

    09/22/2017
    04:30PM — 06:00PM

    Live music with THE KILLBILLIES No cover charge Beverage discount Doors open 4:00


  • Walnut Festival Twilight Parade

    09/22/2017
    06:00PM — 08:00PM

    The Walnut Festival fun begins at 6 p.m. Saturday, Sept. 16 with the Twilight Parade on North Mai...


  • THE KYLE JESTER BLUES SHOW

    09/22/2017
    08:00PM — 10:00PM

    Kyle Jester - guitar/ vocals Robi Bean - drums Bob Welsh - bass After playing with Thomas Ye...


  • Rockridge Ice Cream & Gelato Tour

    09/24/2017
    03:00PM — 04:00PM

    Satisfy your sweet tooth this this one-hour guided walking tour that helps kids of all ages explo...


  • About Abstraction: Bay Area Women Painters

    09/24/2017
    03:00PM — 05:00PM

    Opening Reception: Sunday, September 24, 3-5pm $5 Admission, wine and hors d'oeuvres hosted by t...


  • About Abstraction: Bay Area Women Painters

    09/24/2017
    03:00PM — 05:00PM

    Opening Reception: Sunday, September 24, 3-5pm $5 Admission, wine and hors d'oeuvres hosted by t...


  • Lyrical Dreams

    09/24/2017
    04:00PM

    - All three composers on this program write in a lyrical, expressive style, and all three pieces...


  • THE SUNDAY PAPER

    09/24/2017
    04:00PM — 07:00PM

    With former and current members of Tower Of Power, Cold Blood, Sly & The Family Stone, Santana an...


  • Walnut Festival Twilight Parade

    09/24/2017
    06:00PM — 08:00PM

    The Walnut Festival fun begins at 6 p.m. Saturday, Sept. 16 with the Twilight Parade on North Mai...


It looks like we don't have any events for this date. You can always add an event.

It looks like we don't have any events for this date. You can always add an event.

  • Volunteer Gardening

    09/27/2017
    09:00AM — 12:00PM

    It takes a lot of effort to maintain six acres of lush garden space, and as a small, nonprofit or...


  • MONTHLY MOSTLY BLUEGRASS EXTRAVAGANZA

    09/27/2017
    07:30PM — 10:00PM

    Hosted by the Armando's House Bluegrass Band Bruce Campbell - bass Rick Horlick - mandolin L...


 

 

 

September 2017
Oasis Veterinary Pet Adoption Connection

 

Loading Family Features Content Widget
Loading Family Features Article

 

Interested in advertising or becoming a community sponsor? Contact us at 925-335-6397 or email us at info@ourcommunityfocus.com