The decision to rent your property or sell your property is often a difficult one to make.
There may be a good reason why you would want to sell, such as the realization of profit. This profit could be used to buy another property or a bigger property, or those extra funds could be used towards paying off debt. Renting verse selling really comes down to what circumstances you find yourself in. It’s important to understand the difference between the process and results of both choices.
What To Do With The Money
The first thing you need to ask is what are you going to do with the money?
If you want to reinvest it or put it in a slush fund, it is not going to do anything for you. As we’ve told you in previous blogs, renting out a property is one of the best financial decisions you can make. The tax codes are set up to reward rental ownership whether that means writing off all your expenses or including depreciation and setting that aside with any additional profits. It’s a tremendous perk to be able to do this and always adds to the revenue in your pocket.
Selling Comes with Expenses
Should you decide to sell your property, there are expenses you must prepare for. You may have an 8 percent selling cost, which means that even if you get the money you want for your property, you will be giving at least 8 percent of that away in Realtor fees and closing costs. That 8 percent can be a big number no matter what price your property sells for. You must be sure you want to give that money away rather than keep your property as a rental and receive the benefits of being a landlord.
The Truth of Two Mortgages
One of the reasons people consider selling is because they feel their debt ratio is compromised with their existing mortgage. Working with Gulf Coast Property Management can help that. Many of the banks we work with will see an existing rent roll and will take the mortgage debt out of your personal debt ratio. They will look at your mortgage as an investment that yields a return. You build wealth when someone else (your tenant) pays one of your mortgages. All of that principal balance on the mortgage will be paid for by your tenant while you reap the tax benefit. You are also still free and clear to go buy your own personal residence without it affecting your debt ratio. It really is a good system.
Increasing the Value of Your Property
The Manatee and Sarasota area is a great real estate market that is seeing tremendous success. There is a big temptation to capture some of the revenue the properties have created over the last few years. If you think about it, the interest portion when you do a mortgage is very low. You aren’t paying off too much of your capital right away because much of it has been going to the interest portion of the mortgage.
The longer you own the property, however, the more capital you pay down while the value of your property increases. You won’t find many people who regret holding onto their property for that reason alone. By renting it out, the cost is being paid by someone else while your property gains value. It is a win/win situation and almost too good to be true.
Working with Professional Property Managers
If you’re thinking of selling your property because you think it’s too much trouble, let a property management company take care of that. We can bring you in for the major decisions while taking the day-to-day stress off you. Our job is not just to do maintenance or paint or clean your property. Our real job is to build you wealth. We build wealth for our customers and at the end of it, you will have made money without putting in a lot of effort.
If you are still debating about renting versus selling, please give us a call. We can give you honest answers and explain all the incentives of being a landlord. If you have any additional questions, please feel free to contact us at Gulf Coast Property Management.