If you are a real estate investor, there comes a point in time where you have to answer an important question.
‘Should I rent or sell this property?’
This is an important decision that requires a realistic look at many different factors.
Comparative home prices, location and rental values in your area are just some of the things you should consider as you make this choice.
While it may be easy to just “fold” and sell your property, if you “hold” onto it for renting you may stand to benefit now and down the road in the future.
Let’s look at some factors to consider about renting vs. selling property to help you give a clearer picture of your options.
Are you someone who is looking to get in the invest property game but don’t know whether to rent or sell? Here is a full comparison of leasing vs selling.
One important consideration is what the current market is for your property.
You need to take the time to research what comparable properties in your areas are selling for. Also, evaluate what sort of rental income your property can earn you.
Sometimes, there is a shortage of places to rent, which drives up the rental market. This can make holding onto your property pretty tempting but there is much more to consider.
Evaluate Your Total Expenses
If you are considering renting or selling your property, you need to determine what your total expenses are to hold onto it.
Things to consider with your total expenses include any sort of mortgage on the property, any homeowners’ association dues or annual expenses and property insurance, to name a few.
In order to know if you can receive rental income that can cover these costs on their own, you must get to that bottom line figure.
Once you learn that dollar amount, you will then need to figure out what, if anything, you are willing to cover out of your own pocket.
For example, if your rental income can only cover 75% of the costs, are you willing to supplement the other quarter of the costs?
If not, you may need to consider selling your property instead.
Consider the Area’s Future
One of the things that drive real estate value is where it’s located.
There’s the old saying that the most important part of a piece property is “location, location, location” still rings true today.
You need to take a realistic look at where your property is located. Is this an area that’s consistently a desirable place to live or work?
Is it in an up and coming area with lots of development? A place where people are flocking to live or work?
With development can come an increase in property value but it’s never a guarantee.
But one important thing to remember is that if you can’t foresee your area growing at a good rate within your timeframe of holding the property, it is time to sell.
When an area is growing and property values are increasing, you can reap the benefit of a potentially higher rental income over a period of years.
If you have a fixed mortgage on your property, this will be a luxury for you.
Weigh Your Commitment
While some property owners recommend owning property and renting it to tenants, it’s not that simple.
Part of retaining ownership of property is the responsibility of some of the upkeep. It also means that you will need to either handle property management yourself or find someone else who will.
If you are paying someone else to manage the property, be prepared to factor that into your costs and anticipate that it will increase over time.
Also, consider whether or not you will be able to find a reliable tenant who will pay you on time regularly. If you are not receiving regular rent payments, you need to be prepared to float money to pay for things until you do.
And you might not ever get that rent money at all, or it will cost you money to pursue it through the legal system.
If the idea of having to handle things these sorts of tasks is too much, you should consider selling over renting.
Preparing Your Property
When you are deciding whether to rent or sell your property, keep in mind that there is some cost in preparing to do either one.
If you have spent a lot of money investing in your property — through the initial purchase and improvements — there may not be much for you to do in the way of preparing to buy or sell the property.
On the other hand, if you bought property and did minimal work to it, you may have to consider doing more to help you sell it or earn the rent you want.
While preparation of the property can be as simple as adding fresh paint to walls and putting in nice flowers, it could be a bit more involved too.
Renting vs. Selling
Deciding what to do with your investment property is an important decision that requires careful consideration.
One of these factors is reviewing the market in the area where your property is located. Is it a place where property holds its value? An up and coming area to raise a family or run a business?
On the other hand, it may be an area that is on the decline.
If you are leaning heavily towards making your property a rental, take into account the expenses and upkeep that come with being a property owner.
There is some risk that comes with being a landlord. Things like rent being paid on time, property management and other tasks.
Taking the time to weigh these different factors will help you feel more confident in your decision to sell or rent your property.
You don’t want to rush into any decision like this.
Once you take a realistic look at these things, you will decide what is best for you and this helps with future property transactions down the road.
If you are thinking about putting your home on the market as a rental or to be sold, contact the experienced professionals at RPM Queensland Pty Ltd, today!