At Zenith Properties, we frequently encounter property owners in Clark County, Washington, who are torn between selling or renting their homes. It’s a question with no one-size-fits-all answer. The decision depends on various factors, including your personal circumstances, mindset, and financial projections. In this blog post, we will explore the benefits and drawbacks of both selling and renting. By carefully considering the numbers and evaluating your situation, you can arrive at the best decision that aligns with your goals and maximizes your financial outcomes.
Should I Sell My Home?
Selling your home could be a good option if you are looking for an immediate financial boost. However, it can be a costly process, and it could force you to forgo long-term profits that you could get through renting. Here’s a closer look at the benefits and drawbacks of selling:
Benefits of Selling Your Home
- Access to Cash: Selling your home allows you to convert your equity into immediate cash, providing a potential financial boost.
- Capital Gains Tax Exemption: Depending on your eligibility, you may be able to avoid paying capital gains tax, further enhancing your financial gain from the sale.
- Funding Life-Changing Priorities: The proceeds from selling your property can be used to finance significant life priorities. Evaluate the relative importance of these priorities and ensure that selling is the optimal choice for fulfilling them.
Disadvantages of Selling Your Home
- Costs and Expenses: Selling a home comes with significant expenses, including brokerage fees, excise tax, and title and escrow fees, which can collectively add up to 8% – 10% of the total sales price. Additionally, you may need to invest in sale preparation and address repair costs negotiated by the buyer. Capital gains taxes may also apply, and you might need to bring cash to cover expenses if there is insufficient equity.
- Opportunity Costs: Selling means potentially losing a low-interest mortgage that cannot be easily replaced. You will also miss out on future property appreciation, which could be financially advantageous in the long run.
Questions to Consider If You Want to Sell
With all of those benefits and drawbacks in mind, here are some key questions you should think about to determine if selling your home is the right choice for you.
- How much will your property sell for? Get a market analysis from an expert and find out.
- If you sell, how much net equity can you realistically expect to have after all of the selling expenses?
- How will you feel if it takes longer than expected to sell your property and you are forced to take a price reduction to sell it? The market is much slower now than it has been in previous years, especially with the higher interest rates buyers are saddled with these days.
- How will you feel if mortgage rates stay above 5% indefinitely and you sell your property that has a 2.5%, a 3%, a 3.5% or a 4% interest rate?
- How will you feel 5 years from now if the property you used to own gets resold for $100k, $200k or $300k more than you sold it for? That’s something to think about!
Should I Rent My Home?
Renting your home can be a great long-term source of income. However, property management isn’t for everyone. Here are the main advantages and disadvantages of renting to help you determine if it could be a viable option for you.
Benefits of Renting Your Home
- Recurring Rental Income: Renting out your property provides a regular cash flow through rental payments, offering a steady source of income.
- Property Appreciation: By retaining ownership, you can benefit from future appreciation, allowing your property’s value to grow over time.
- Equity Building and Tax Advantages: Renting allows for equity accumulation as your mortgage is paid down or covered by tenants. Moreover, you can take advantage of tax deductions by depreciating the property, potentially saving thousands of dollars annually in income taxes (consult a tax professional for details).
Disadvantages of Renting Your Home
- Foregoing Equity Harvesting: Renting means you cannot access the equity in your property unless you opt for a home equity line of credit (HELOC) if you require immediate cash.
- Potential Management Hassles: Being a landlord involves dealing with tenants, which can be challenging at times and may require your attention and time.
- Complex Regulations and Property Maintenance: Landlord-tenant laws are intricate and subject to change. Property maintenance responsibilities can also become burdensome over time. Engaging professional property management services can alleviate these concerns.
Questions to Consider If You Want to Rent
- How much will your property rent for? Get a market analysis from an expert and find out. If you rent, how much will your monthly net cash flow be after paying the mortgage, professional management, and including a reasonable maintenance allowance.
- What will your property be worth in 5 years? If it appreciates at a conservative rate of 5% or 6% per year it will go up in value between 28% and 34%. If your property is worth $500k today at 6% appreciation it will be worth approximately $670k in 5 years!
- How much will your mortgage be paid down over the next 5 years? Odds are it will be a lot if your mortgage rate is below 5%.
- How much will you save in income taxes by depreciating your property? If you are in a 20% tax bracket, your tax savings could be $2,400 each year which is $200 per month in tax savings.
- How will you feel about being a Landlord? Does the thought of managing tenants make you nervous or afraid? Or will it make you happy to know you are providing a home for a family who needs it while your property is producing income and appreciating?
Get Professional Property Management Advice
To make an informed decision, gather the facts, run the numbers, and deeply consider your situation. Being a landlord may not suit everyone, but selling may not always be the most financially sound choice. Take into account your financial goals, personal preferences, and your willingness to handle the responsibilities associated with each option. By weighing these factors, you can determine whether selling or renting aligns better with your circumstances and leads to the most favorable outcome for your Clark County property.
If you need professional advice, don’t hesitate to contact Zenith Properties! We have Licensed and Experienced Real Estate Professionals and a Team of Professional Property Management experts who can evaluate both the Sale and Rental potential of your property.
At Zenith we provide our clients with:
- Maximized Financial Results
- Personalized Responsive Service
- Provided by Highly Trained Professionals.
Let us know your situation and goals so we can help you achieve the best possible outcome whether you decide to Sell or Rent your property. Contact us today to get started!
Is It Better to Sell or Rent My House in Clark County WA?
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