should i rent or sell my house video tips and ultimate guide you will learn what to consider when wondering if you should you sell or rent a home? six points to consider to determine if that’s right for you. Let’s go ahead and get into those six points we’re talking about in determining whether you should rent out your house or sell your house. Whenever we’re thinking about selling a house, it’s something that’s going to cross our mind at some point because we all hear of people that have become real estate investors, and they built themselves up slowly by keeping every property that they actually purchased, and renting it out to build up a passive income stream. Done correctly over time, it could really build your wealth and really help you out. But these next six questions are things you should consider to see if it’s right for you.
Starting with question number one, what is your current purchasing power? In other words, what is your current purchasing power if you sold your house? If you have a house that’s worth $300,000 and let’s say that you bought it for $150,000 and just for the sake of easy math, let’s just say you have $150,000 of equity. With that $150,000 of equity, you’d be able to qualify and purchase another home because you’ll no longer have that debt of that monthly mortgage, and you’ll have all this cash from whenever you had purchased your home and it appreciated, to get to the current point to put towards your next home and do things that you want to do with that money.
These are things to consider. What is your purchase power? What are the pros and cons? What’s the opportunity costs of renting the property out compared to getting your money today? Only you can decide what’s most comfortable to you, but getting clear on your current purchasing power is going to help.
Question number two is, what is your purchasing power without, without your home equity? So now let’s say that you could get that $150,000 right now, if you sold your house and you could use it for your next home. Well, what’s your purchasing power without it? Does that mean that you’re going to need the compromise on your next home? Does that mean that you’re going to have to look in perhaps a area that’s just so-so, or just okay for you, but not your dream location that you could otherwise get with the home equity? Does that mean you’re going to have to go down in square feet, down in bedrooms? What are the trade-offs to purchasing your new property without home equity? That’s another thing to consider as should i sell my house or rent it.
The third question you want to talk about is, what is your monthly income and expenses? Now one more factor in your monthly income and expenses, something that you would want to do is actually consider what is your current monthly mortgage on the property that you intend to rent out? What are your expenses associated with it, from home maintenance to landscaping, to if you had to pull any type of maintenance and care of the property or the grounds? What are those expenses on a monthly basis? Now after you chat with your trusted real estate advisor, you meet a great local loan officer, you start talking to them about how much you could get approved for in both scenarios, either with the property being sold, or actually without that home equity.
Well, without that home equity, the lender is going to have to factor that mortgage, and they’re also going to have to factor the second mortgage because you’re going to have two mortgages. Once all those numbers come down, then you’re going to need to know, “Okay, worst case scenario, a rental property one over here, it’s vacant for three months. It’s going to cost us X number of dollars in between the mortgage and the upkeep of this property, compared to and on top of how much it’s going to cost us to maintain our new home. You need to be prepared for that reality and be prepared for it by factoring this up front to decide if this is something good for you or not.
Now the fourth question that you want to consider is, can you just plain out, handle the stress? Because owning two properties, as you know, owning one can be a little bit stressful. You’ve got the home maintenance, you’ve got the mortgage, you got things to consider, but now you throw into the pot the stress of being a landlord. You’re going to be responsible now to get those things fixed, like a leaky toilet, leaky faucet, refrigerator goes out, water heater goes down.
You, as a landlord, are now responsible for that, and you might want to … You could do some of the handiwork yourself, or maybe you, your trusted real estate advisor can refer you to a great handy person. Or, perhaps you hire a property management company who generally has all of those services ready to go. Nonetheless, you’re still going to be on the hook for the expense of that, and you’re going to still be on the hook for making sure that all that stuff works out. Can you handle the stress of the property not being rented out for three months, let’s say while you’re paying your mortgage on your new property? Only you can decide whether that’s right for you.
The next thing that you want to consider is, can you find the best renter for your home, or are you going to end up with a deadbeat renter? And I hate to say that, but it’s true. Some tenants are extremely, extremely wonderful and they’ll take care of your home just like if it were theirs. They won’t even bother with handiwork. They’ll probably give you a call and say, “Hey, Andrew, you know what, there was a leaky faucet. Do you mind if I fix it? Hey, Andrew, you know the hot water heater went out. Do you have a home warranty on this property? Should I call them? Or, you know, what do you want me to do here?”
And they can actually be very beneficial in keeping up your property and taking very good care of it, as though they owned it themselves. On the flip side of that, sometimes you get to come across those deadbeat renters out there, those deadbeat tenants that just like to thrash and crash everything they move into. They’ll punch holes in your walls, they’ll kick holes in the wall, they’ll break stuff intentionally. Then they’ll get upset with you like everything was broken to begin with, when you know for a fact, everything was perfect because it was your home, it was your primary home, it’s what you loved, it’s where you lived and you took really good care of it. And now, you have this other person over here just thrashing and crashing the property. You got to be prepared for both realities.
Now a benefit of working with a property manager is that they’re going to be able to assist you and they’re going to help you screen the tenants, and they’re going to be looking for the tenants that are ideally more long-term. They’re going to be running credit checks on those tenants, and they’re going to be trying to find the best tenant possible for your home. Keeping in mind that they’re going to share this information with you, to ultimately see what you want to do with tenant A, B, C, and D. You can find out whether that’s going to work for you or not.
Now the sixth thing involves you contacting your tax professional, perhaps your CPA, or tax accountant if you have one, and asking them, “Okay, what’s my tax liability? What’s my tax ramifications of owing two homes? How’s this going to work, having a second home? I’m renting out this property.” The rental income, by the way, is going to be taxable and you may lose certain other benefits as a homeowner since that’s no longer your primary residence, but you’ll have it on your primary residence over here.
Now it’s something to consider and it’s something to think about and plan ahead for. Don’t just say, “Oh, I’m getting ready to go buy a new house. We’re going to keep this one. We’re going to rent this one out and we’re going to go buy this one here without considering these questions.” Because if you don’t consider these questions, you could find yourself in for financial heartache throughout the year, and also come at the end of the year into the next tax period, you could have an issue here.
This probably won’t be as big of an issue for somebody that kind of has an investor’s mindset or somebody that’s younger in life that’s saying, “Hey, you know what? I’m going to build up my nest egg, and I’m going to do it with real estate, and I’m going to start off at a less expensive home knowing that it’s easy for me to achieve, and I’m going to rent out that property. Then I’m going to go buy another one and I’m going to keep playing this game over the period of the next 20, 30, 40 years of my life. So at the end of the day, whenever I’m 55, 60 years old, I’m going to be able to go ahead and retire comfortably with a passive income stream coming in from all this property.” It’s a novel idea. It’s a Holy grail that a lot of us would like to have and a lot of us would like to achieve. At the same time, by considering these six points, you’re going to be able to ultimately decide whether that’s something that’s right for you or not.
Now, what I’d like you to do is tell me, which one of these six questions are most impactful for you, and any other questions that you have that you would like to put into something like a video, or something that you believe somebody else should be considering. Was today’s video, the conversation about knowing what your current purchasing power, is most impactful? Or, how about spotting a deadbeat tenant? You know which one of those two are the biggest points and takeaways for you today.
Now I’m going to put my contact information up. Feel free to reach out to me with any questions that you may have. I always enjoy hearing from you. Or, if you simply just need help finding a top agent where you live. If you haven’t already done so, I’m going to ask you to do three things. Number one, please subscribe to this channel. Number two, please like this video. Number three, please share this video around with someone you know it’s going to be able to help. In between now and next time, I’m wishing you and yours a lifetime full of love, wealth, abundance, and happiness. Thank you for watching, and enjoy an amazing day.
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