If you’re a homeowner who’s facing a move in the near future, you have a decision to make regarding your current home. If you’re not going to live in it, your first inclination may be to sell.
But not all circumstances are the same. If you haven’t lived there long enough to build equity, or if the market is down, it might not make great financial sense to sell it. If you envision moving back to the area, it may be wise to hang on to a home so you have a place to live when you return.
Depending on your specific circumstances, it might be prudent to keep the home and rent it out. It could be a tough decision, so here are the five top reasons you should rent your house rather than sell it.
You’d take a loss
If you paid more for a home than what you could sell it for right now, it hurts. If you haven’t lived in it long enough to build substantial equity, you might even have to bring cash to the table in order to close.
If you were to rent your place instead of selling it, your tenant’s rent should pay down your mortgage (and preferably all the other expenses) while providing time for the property to appreciate. Your house will likely be worth more in a year or two, and that could be the difference between owing or collecting money when a sale goes through.
In a place like San Jose, where prices continue to increase most of the time, a couple of years’ time could mean tens of thousands of dollars.
Someone can manage the property for you
If you’d like to take advantage of a home’s increasing value by holding onto it but don’t want the hassles of being a landlord, you could hire a property manager.
Property management in San Jose is affordable. Market rental rates are usually strong enough to provide a property owner with positive cash flow each month even while paying a percentage of the rent to a property management company.
Having someone else manage the property for you means you won’t experience the common landlord headaches, and you can rest easy knowing that even if you’re out of town, your home is taken care of.
Your situation is temporary
In today’s employment market, things are fluid. There are contract work gigs and temporary assignments that can take people out of town but not forever.
If you love the home you live in now and expect to come back to the area eventually, keeping the home means you’ll have a great place to stay when you return. Meanwhile, your tenants will pay your mortgage.
There’s high rental demand
Rental rates escalate when there’s a high demand for rental properties. Take Los Gatos, for example. More than a third of the population are renters, but rental properties continue to be in short supply. That means that rental homes are at a premium.
You could move out of town and let a Los Gatos property management company handle everything while you’re gone, and collect top-of-the-market rent. The net income from the property each month could help pay your new housing costs, and you don’t really have to lift a finger.
There are tax advantages
The Tax Cuts and Jobs Act of 2017 made owning rental property especially attractive, tax-wise. It placed caps on mortgage interest and property tax deductions for primary residences and second homes, but investment properties with those expenses can treat them as deductions against rental income.
Plus, rental properties qualify for depreciation deductions, and “pass-through” income – rent received – is taxed at a much lower rate than the income you receive from a regular job. Also, any costs such as insurance or fees you pay a company for providing property management would be deductable to offset rental income you collect.
Valley Management Group has been providing trustworthy and affordable property management in San Jose and Santa Clara County for 40 years. Both owners and tenants have given high ratings to the services they provide. If you own rental property in Santa Clara County get a free property management quote with one free month of property management services and call 408 286-4200 or fill out the contact form.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group