Continuation from my last blog….My House isn’t Selling in a Seller’s Market.
So what happens if you are one of the 439 homes that were removed from the market in the under $200,000 price range in the last 30 days. Perhaps you have decided to wait until the market improves (inflation catches up with your desired price) or you have decided to wait until you have paid more down on the house so you have more equity.
But what if you really need to move and so you decide that it might be better to rent the house than sell at the current market value. I understand. I did that one time when we were young. We bought a house in April of 1992 and got orders to move to Oklahoma in December of the same year. We had no equity and no money to bring to closing, so we chose to rent the house for about 4 years. At that time we were able to sell the property and walk away without bringing money to the table. And while I currently own rental property, I never want to be a long distance landlord again. Just too much stress.
First, you need to understand tax law. If you own a house that you have lived in 2 out of the last 5 years and sell for less than $250,000 as a single person or $500,000 if you are filing married, you do not pay taxes on the money from the sale of your primary property. You do not have to reinvest this money. It is yours to keep. If you turn this house into a rental, you will want to discuss the capital gains tax and the recapture tax of any depreciation you take from the house with you CPA. You could incur more in taxes than you pay to walk away, so please discuss this matter with a professional accountant.
Second, there will be maintenance. Things break in houses and tenants want those things repaired in a reasonable time frame. And some repairs like heating are mandated by law that you repair in a certain time frame. The tenant is not going to want to wait until you can save up for the new roof, air conditioner, plumbing repair. So make sure you have some savings to make those repairs.
Third, tenants don’t always take care of other’s people’s property the way you would. Not all of them are going to change the air filters regularly, clean up after themselves or take care of the yard the way you would. When they move out of the house, you will most likely need to paint, clean or replace flooring, trim bushes, and other minor maintenance items.
Forth, it may take you some time to find a good tenant. I would advise you that it is better to wait to get a good tenant than to just take the first one with cash in their pocket who you may need to evict. So you will want to have some money saved to pay the mortgage while you wait to get that tenant. And hopefully they pay every month and on time.
Finally, If you are out of state you might consider hiring a property manager to look after your property. Make sure the rent is sufficient to pay the management fees, mortgage and any repairs. Also make sure you get a good recommendation for the property manager, since some of them are better than others. Ask questions as to whether they have an in house maintenance person or other contractors.
After reviewing all the costs decide if you really want to become a landlord. I do believe there is money to be made in rental property if you that is what you want to do. It is a job. If that is not what you want to do as a job, I would suggest you cut your losses and sell the property at fair market value in this great market.
If you are looking for a great realtor with experience who can get your house sold, call me today. 405-213-2992 or visit my website at equityhomesteam.com.