Most homeowners will have to answer this question at one time or another. You might relocate for a job, or decide to combine households with your significant other, or it might be time for additional square footage to accommodate your growing family. Whether to sell or lease your home is an important decision. While this question can be fraught with emotional baggage and sentimentality, for the best interest of your family your answer should come down to the math. Seek guidance not just from someone trying to sell your property but also from someone who can guide you on leasing. Some companies can run numbers on both scenarios and offer both services. Plug in your numbers and consider the outcomes. Some companies even have the data to forecast future financial potential for your property.
In your calculations, you should assess your financial situation, your future housing plans or goals, your state and federal tax ramifications, and the current and projected home values in your neighborhood/local market. Next, learn how leasing can be a beneficial way to grow your wealth and evaluate your local rental market. You already own the asset so there is no additional cash outlay to obtain something that may already be positioned to produce a return on your initial investment.
To Hold? Or, Fold?
Real estate is like a game of poker, only with market data and forecasts. As Kenny Rogers croons in his classic song, “you gotta know when to hold ‘em, Know when to fold ‘em.” The answer to whether you should hold (lease) or fold (sell) ideally, is a resounding ‘hold ‘em!’ Why? Keeping your home and turning it into a rental property enables you to continue to build equity on your purchase while you are paying down your mortgage. On top of this, keeping and maintaining your home as an asset helps you build substantial wealth in your financial portfolio.
Of course, there are scenarios when folding might be appropriate. If you are experiencing a divorce, death of a spouse, or have crushing medical debt, selling your real estate asset can help you wade through the storm financially, and emotionally.
The last thing you want to do is to take your cash-producing, equity-building asset, then sell it, and pour the money into a new, larger home, or a non-cash-producing asset. It might be tempting to take your proceeds from the sale and buy a long-yearned-for boat, but you’ll induce cringes amongst your real-estate friends. The goal is to make your money work for you, not to continue to purchase things which may you work for them.
Consider Your Local Rental Market
You’ve done the math. Now take a look at some Austin rental market forces that can help make or break your rental business venture. While our rental market is slowing, tenant incomes are healthy, and the job market continues to roll along. You’ll want to do some in-depth research and consult the experts, but here are a few bright notes to consider.
In 2016, an average of 159 people moved to Austin each day. (BizJournals)
According to a 2017 affordability survey of major American cities, Austin ranked #5 in offering incomes large enough to support day-to-day living. (GoBankingRates)
In areas surrounding Austin, such as the northwest and northeast Austin, occupancy rates are much higher at 94% (Statesman)
Austin boasts a robust pool of potential renters, with money to spend, in a metropolis that continues to expand outward. Chances are, Austin will support a strong rental market for years to come.
The Payoff Takes Patience
Real estate investing is a long-term game. Very often the people who didn’t want to get into the game find that in year three or four, they recognize the money they’re making, and reap the benefits from that additional income. Those formerly reluctant landlords then start looking for their next rental property to buy. Be patient for your payoff! We’ve seen even the most reluctant landlords get excited when they see the results.
Concerned about the time it will take to manage your rental property? Based in Austin, 1836 Property Management specializes in managing real estate investments for clients around the world. We take the hassles and the worry of being a landlord off your shoulders. If you decide to lease your property, the 1836 team can help you profit without the headaches.