Consider These Details When Deciding To Rent or Sell
Both renting and selling offer advantages. To help decide which option is the right fit for you, make sure to consider the below items!
LOSS OF PRIMARY RESIDENCE: There are tax exemptions on capital gains of a primary residence, you may exclude the first $250,000 of gain from the sale of your home from your income and avoid paying taxes on it. The exclusion is increased to $500,000 for a married couple filing jointly.
DISCUSS WITH A CPA: Discuss any tax implications that may result from sale or rental of home.
RULES AND COST OF EVICTION: There are extensive measures in place to protect tenants. This can make it challenging to remove someone from the home. The eviction process can be lengthy and costly. Make sure to familiarize yourself with the process.
TERMINATING A LEASE: Here again, the measures in place for tenant protection make it challenging for the owner to prematurely terminate a lease. A lease cannot be terminated for changes in circumstance, such as deciding to sell the home. It is quite difficult to sell a tenant occupied property.
TENANT RELOCATION FEES: Landlords may be responsible for mandatory tenant relocation fees.
PROPERTY MANAGEMENT COMPANIES: Due to the complex nature of tenant laws many property owners elect to use a property management company to handle the placement and maintenance of tenants. There is a cost associated with property management companies, home owners should be aware of these fees before deciding to rent.
RENT RATE: It is critical to understand what the home will realistically rent for and if that rate is favorable to the home owner. Rental rates must exceed PITI (principal, interest, taxes, and insurance) plus any property management or other fees for it to generate a profit.
REAL ESTATE MARKET: Consider any assumptions or shifts in the real estate market over the next 12 months and how this could impact sale at the end of a tenant lease.
REPAIRS AND MAINTENANCE: As a landlord you become responsible for all needed repairs. A property management company can assist in the project management piece of this, but the cost ultimately falls to the home owner.
REPAIRS AFTER TENANT OCCUPANCY: Tenants do not always treat the home the same as an owner would. This can result in deferred maintenance or increased wear and tear on the property. It is possible to incur additional expenses after a tenant moves out to either sell or prepare it for the next tenant.
TIMELINE FOR USE AS A RENTAL: The longer you plan to keep the home as a rental the more it makes sense. If used for a rental longer than 3 years you will lose the tax exemption on capital gains.Don’t worry about sounding professional. Sound like you. There are over 1.5 billion websites out there, but your story is what’s going to separate this one from the rest. If you read the words back and don’t hear your own voice in your head, that’s a good sign you still have more work to do.
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