Selling Your Home VS Renting It Out

Selling Your Home VS Renting It Out

Full Video Transcript Below

Selling Your Home VS Renting It Out

Alice Lema: [00:00:00] Well, Hey, real estate fans, Alice Lema, broker, John L Scott back with another podcast. And today we're going to talk about a question that just came up on a phone call, but it's also on a lot of people's minds. I've actually had a lot of these conversations about. Should you sell your home or should you rent it out?

And here in our area, in Southern Oregon, we have both a lot of equity and medium high prices, not as high as they were like a year or two ago, but still way up from where they were before COVID. And then we have these high rents. And a real crisis in our rental market where we just don't have enough inventory.

You'd think we, we have a shortage of purchase inventory, dive into the rental market and it's really sad. I tell you, it's really sad. And also just if you don't know, the state of Oregon is a rent control state. But you gotta know that if you're considering being a landlord, there's a lot, a lot of rules.

[00:01:00] But that's a different podcast. So today we're going to compare the two ideas of selling and buying a different home or keeping the home and using it as a rental. So I've got five things for you to consider before you do that. And thanks to Mike for the phone call because he was like number four this week. And so tipping tipping point, it got on the podcast.

So number one, look at the property. And look at it with very clear eyes, no emotion. You know, no fondness, no resentment, because sometimes we have resentment for our real estate, but look at it with a real clear, clear thinking and ask yourself this question, would I have purchased this property as a rental back when I bought it? A lot of people don't do that. A lot of people just can see how much it's worth now on the rental market. And also how much it's worth now on the for sale market. [00:02:00] And I want you to take a step back and be real neutral and ask yourself back, back in the day, would I have purchased this if I was planning on being a landlord? Yes or no. And if it's in the maybe column, then that's fine too, but you just got to have real honest talk with yourself.

Number two, how much net profit. If you're going to have it be a rental, how much net profit are you really going to get every month and you got to work in a couple of things to your business model that people forget, you need a savings every month you need to budget for damage. Even if the damage isn't right, then it might be later but you got to have a savings for damage and you have to have a savings for vacancy. Now we don't usually have vacancies anymore. And if we do, then not for very long, but you need to put that in your business model because just like all markets, they ebb and flow and the rental market right now is super tight and [00:03:00] more in the landlord's favor, at least on the demand side more in the tenant's favor on the law side. But you got a budget for that and people don't. So budget that have a, have a big buffer. If you're going to have it be managed, then plan on adding that in and then calculate your actual net profit.

Okay. Number three, if you decide to sell the property, how much net profit are you going to get from that? Have a real honest conversation and run the numbers and run the numbers for what if you end up giving your buyer, you know, closing costs, cause that's super common right now. Where are you going to go and what is that going to cost? How much are you going to need to repair or prepare your home to get ready for market? Cause even though we have a shortage of inventory on the purchase market, that's what we call it or resale market. The buyers are still feeling [00:04:00] more in charge than they were. They're not in charge in charge, but it's still a balance. You know, we're trying to stabilize, so it's still a balance. And the buyers are nervous, you know, they're nervous about interest rates and you got to, as a seller, keep that in mind and you want to have your home in tip top shape so that you get top dollar.

And also so that it just happens. You really want those offers to come in in your first two to three weeks. Ideally. Okay. So number three, if you sell, be honest about the net profit, be honest about all the expenses, be honest about preparing, moving if you're going to have help, what that's going to look like and how much is it going to cost in total, for where you're going to go. So that's number three.

Number four, what are the tax implications of either decision? Because there are some, if you've got profit in your home and you're moving it into another asset. I mean, I'm not a tax person, but a lot of times that's fine. There are no tax implications, but there [00:05:00] might be maybe you've moved out of your property and it's empty and that's why you're thinking I can have it be a rental, but go talk to a really smart financial person and run the numbers on both scenarios and put them side by side.

Okay. Number five, if being a landlord is really what your next step is, then there's a lot of ways to do that. What if you don't have to sell the house at all? What if you could take a smidge out of that equity if you have it and use that as a down payment for the rental? What's the other possibility? What if you sold your house? And purchased a different home to live in, but smaller and took the extra money and use that for the rental. And that's just two ideas off the top of my head. If I had more time, I could probably come up with more ideas, but you get the drift. So use these five questions [00:06:00] to really analyze your situation unemotionally, and then you can put the emotion back in and make your final decision.

But it's a great idea to be a landlord. I'm a big fan, especially in the state of Oregon, even though it's hard, and there's a lot of rules, and a lot of the rules are weird. It's, it's something that we desperately need. We desperately need good landlords and we need more landlords. So I would definitely make a pitch for you to consider doing that.

But I don't want you to sacrifice a beautiful property that is not a good fit for being a rental and unless you know, the person sometimes even when we know the person, it doesn't end up well. But really look through these 5 questions and look at the answers. And then it'll be easier to make the decision.

And you can always call me and text me and I want you to call me and text me. I want to be your agent. My number is [00:07:00] 541-301-7980 and we can talk about all the different scenarios and the possibilities for the next step of your real estate life. Have a beautiful Southern Oregon weekend.

Hug those you love. Bye now.

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