Should I sell my current house or keep it as a rental property? I hear this question a lot. As an investor an active home buyer in the Raleigh area, I am always looking for ways to buy more properties. Whatever your situation there are a few factors that should be considered before making your decision.
Read on to learn about these six factors to consider when deciding if you should rent or sell your house in Raleigh.
1. Why Are You Selling?
Why do you want to sell your current home? Do you want to buy a larger home? Are you relocating? If you do sell your current home will you be buying another home or will you rent? Suppose you’re dependent upon the equity in your existing home to purchase your next one. You don’t necessarily have to sell. If the numbers add up for a profit on the house as a rental, this is an essential factor to consider when deciding if you should rent or sell your house in Raleigh. You could access the equity through a home equity line of credit or HELOC to purchase your new home. If you should keep the existing property as a rental, you will also earn equity in the house, as appreciation will continue to increase the value, and the rent payments will gradually pay down your existing mortgage. Another plus, when you do decide to sell, investors will find an income-producing property of particular interest, widening your buyer pool.
2. Market Trends
Current market trends must factor into deciding if you should rent or sell your house in Raleigh. Are you in buyers, sellers, or a balanced market? As of this writing, we are in a seller’s market and inventory levels are at a record low. Therefore, you will enjoy an advantage when selling your current house, but you may have a hard time buying or renting another one! To determine the current market trends in the Raleigh area, or the Triangle NC in general, visit the Triangle Multiple Listing Service Market Trends reports which are published monthly.
Ultimately, you will have to use your judgment on the best move to make given the Raleigh real estate market indicators. If rates are low and demand is high, it may be a wise move. If you don’t feel confident in your assessment, it is worthwhile to turn to a trusted family member or associate with experience with rentals.
3. Capital Gains Taxes
If the property value has risen over the original cost or basis, your gain is known as the capital gain. Capital gains, taxed at a higher rate than earned income, are known as unearned income. If you’re buying a new home because of a job transfer and might be moving back Raleigh, it may benefit you to rent and save on your capital gains taxes, making this an essential factor to consider when deciding if you should rent or sell your house in Raleigh. If you’ve lived in the home for the past two years, typically, you can exclude up to $500,000 for married couples filing jointly, and $250,000 if you are filing singly.
You should remain vigilant regarding current tax trends and upcoming proposed changes because you may need to recalculate your investment strategies.
4. No Equity – Under Water
You might not have the ability to sell because you owe more on the mortgage loan than your home is worth on the current market, which is critical to consider when deciding if you should rent or sell your house in Raleigh. While you will gain equity over time, you must also consider your risk tolerance until you can break even on the property should you decide to turn it into a rental property. In other words, you must also consider if your monthly cash flow and reserves could carry you through a severe drop in rental rates, serious repair expenses, or vacancies for the rental property over an extended period without causing financial ruin. If you’re unsure about what the market would bring for your property, compare the most like properties nearest yours which have sold recently, or you could hire an appraiser to provide a more accurate number. Talking your situation over with a professional investor, like those at Wake County Home Buyers, may provide insight into your specific circumstances and help you decide the right move.
5. Cash Flow & Retirement
While your retirement isn’t at the forefront of your mind when considering selling your home, renting out properties as a long-term plan for passive income can build a significant nest egg. Homeowners can enjoy their golden years by converting their primary residence into their first rental property. The potential for financial freedom that homeowners can ultimately attain through real estate investments is crucial when deciding if you should rent or sell your house in Raleigh. It also affords you the ability to pass along a valuable asset to your children.
6. Are You Ready To Be a Landlord?
While there are many benefits to owning rental property there are also a lot of liabilities. Vacancy, repairs, taxes, insurance, and all the other items that come with the territory of being a landlord can give many people anxiety. You have to determine if owning rental property in Raleigh is right for you. Being a landlord is not for everyone, but it can be rewarding in the long run. Educate yourself on the ins and outs of owning a rental property by doing research. Websites like Biggerpockets, Investopedia, and Sparkrental are great resources.
Why try to figure everything out for yourself when deciding if you should rent or sell your house in Raleigh when Wake County Home Buyers makes selling so easy? Wake County Home Buyers buys houses for a fair price, as-is for cash, usually closing in a matter of days. Call Wake County Home Buyers at (919) 473-6885 or send us a message.