Profile picture for user3471676

Do I see or rent my home? The market is hot for both.

I can't seem to answer this question and its keeping me up at night.

My monthly payment is $4,000 (mortgage, property taxes and HOA dues). If I were to rent my place I would likely get $8000-$8500 per month.

If I were to sell my home, I would likely achieve a sales price between $2.3 to $2.5M. This would represent a profit of about $1.2M-1.4M after broker fees, transfer taxes, etc.. Of course, I would still need to pay taxes on this.

I could use the money I make on the sale to upgrade my family into a bigger home which is why I am leaning towards selling.  Selling would afford me the opportunity to make a larger down payment than 20%, furnish my new home AND still have reserves left over. Making a larger than 20% down payment would lower my monthly mortgage payment which I would like very much.

Would welcome any suggestions or advice.



 
  • August 31 2013 - San Francisco
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Answers (7)

First off, you have to decide if you would like being a landlord. Someone will be messing up your house - can you handle that?
  • September 07 2013
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Profile picture for Rebecca Marvel
Be careful of capital gains tax.  Anything more than $250k is subject to capital gains tax.
  • September 07 2013
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This is a great question with a complex answer.  I agree that it's going to be best for you to really think about your long term goals, and talk to an accountant about taxes and fees involved both in the sale of your home, and it putting it up on the rental market.  It would also be a good idea to talk to a real estate agent (or two) to get an estimate of what your home could sell for in today's market, just to make sure your estimate is accurate.  (I'd be happy to work put together a detailed competitive market analysis of your home if you'd like).  If you decide to rent it, in addition to costs of your mortgage, taxes, HOAs, repairs etc, you'll have to consider the time it will take to manage the property, or the money it will take to pay a management company.  

If you decide to sell, which sounds like a great option for you, unless you can list it very soon, I would recommend waiting until January or February of next year.  In San Francisco, there tends to be a lot of new listings beginning in late September or early October which causes a drop in sales prices (and makes the seller's ideal of a bidding war less likely) due to higher inventory without an increase in demand.  January tends to have very low inventory, and it's after the holiday season (during which many people choose not to go through the hassle of a new home purchase and move).  

I realize this doesn't answer your question in it's entirety, but like I said this question has a very complex answer with many variables.  I hope this helps some, and feel free to contact me if you'd like to discuss your options further!

-Ryan Rudnick
Downing & Co Real Estate Services
  • September 07 2013
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O.K. ...here is my two cents.
 If you don't have to sell your present property and can keep it as an investment that will pay your mortgage,  and continue to appreciate in value, then hang on to it and buy the second property.
The down side is that there are expenses and issues that come up when you own investment property. You could hire a property management company to handle things, but that also costs.
You need to look at all the figures and then see if it makes sense to you. I would highly recommend you talk to your C.P.A. so you can get all sides of the issue before you make a decision.
  • September 01 2013
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I would be happy to analyze and discuss your options in detail so you can make a confident decision.
  • August 31 2013
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Profile picture for sunnyview
I would talk to a good accountant. If your goal is to keep your money working for you then you will need to cost out the rental income/benefits vs being able to invest a part of your equity outright in another investment if you buy a different house.
  • August 31 2013
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Profile picture for Rebecca Marvel
I think it depends upon your ultimate goal.

  • August 31 2013
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