What would you do if you found yourself in such a dilemma? Many people who find themselves with more than one residential property often grapple with making the decision as to whether to sell one of them or rent it out.
Renting out as an option
You may view renting out as simply making money off the property while still having ownership of it, probably because the rent from your tenant is either paying your mortgage or providing you with a steady flow of monthly cash if your house is already paid for.
However, it’s not that simple. Being a landlord comes with its own responsibilities.
So what if you decide to rent out? What are your responsibilities?
- Mortgage payment(if applicable)
- Property tax
- Homeowner insurance
- Homeowner association dues (if applicable)
- Property management company (if applicable)
- House maintenance
it is your responsibility as landlord to do major repairs and wear and tear on the property, like tiling, painting etc. except for major damage, which is generally borne by the tenant.
The truth of the matter is that there are challenges to being a landlord. These challenges can be quite emotionally, financially and physically draining, like handling difficult tenants and their complaints, maintenance problems, and possibly having to evict tenants. You need to weigh the emotional and financial cost of being a landlord against the potential for making profit.
To help you make the best decision as to whether to rent out or to sell, you need to know what it will cost you every month to own that property. You also have to examine what the rental value is every month and calculate whether this amount can cover the mortgage payment, taxes, insurance and any management fees. Remember, you want a breakeven or better still, a positive cashflow . Any extra cash from the rent can be used for maintenance, repairs, or to pay down the mortgage.
How about Selling?
Some have found themselves in need of significant bulk money in which case selling might seem more appealing to them. However there are a few things to consider before taking this option.
- Do you have significant equity?
- Are you going to make a profit from the sale?
- Will you re-invest the money from the sale?
If you have significant equity, you are better off selling. It actually may be a relatively lower risk to choose to sell, provided your plan is to turn a profit or make a wise investment with the proceeds from the sale.
So what do you want to do?
Written by: Daphne Amarkai Quayson
Sales & Marketing Officer, Emerald properties
This article was first published in the June 16, 2016 edition of the Business Finder Newspaper.