Should You Rent or Sell Your Old Home When Moving Up?
In Southern California, the number of home buyers who want to move up are considering keeping their present homes, and their numbers are increasing. When homeowners take advantage of the present real estate market in Southern California, they may wonder if it is a wiser move to become landlords, or would it make more sense to just be free of the property altogether.
The U-T San Diego recently reported that up to 39 of homeowners who want to move up intend to keep their current homes and rent them out after they move. Many of these owners live in San Diego County and up to 62 of those from the surrounding LA metro area plan to hold onto their present homes. Others whose homes do not sell as quickly as they had hoped become landlords by default.
Experts surrounding this trend have suggested that the number of owners keeping their old homes may be a reason that fewer homes are available for sale. The low inventory is especially true in SoCal. It is felt that prices in San Diego County have increased because of this trend, and ultimately, had the result of enticing more Southern California homeowners to keep their old homes as rentals. When the owners do sell outright, it enables them to sell at a higher price, as well. Nevertheless, it is important to consider pros and cons of both options in order to make an informed decision before committing to either plan, Following are reasons to keep your present home when upgrading to a newer or larger home.
1. Property is Underwater
Some properties are still underwater even though prices of U.S. homes are quickly rebounding. The price increase is especially true in San Diego, CA. Some people may be able to lower their other debt, or find a short sale would be beneficial. Even though this is a good time to buy property in order to move up, some people do not want to sell unless they can get the maximum money they have in mind for their present home, and they prefer to wait for a better opportunity.
2. Waiting for an Increase
Since the value of residential property is climbing steadily, many people believe if they hold out long enough their proceeds will be much larger. In doing so, however, they may miss the chance to maximize their profits.
3. Building Wealth
Even though some people do not want to become full time investors, keeping a present property for a rental and buying another home to live in may be a wise decision and a great way to build wealth.
4. Extra Income
Keeping the old house as a rental offers passive income every month that can make life more comfortable.
Or the extra dollars can be saved for retirement.
5. Avoid Capital Gains Taxes
The capital gains tax penalties may be avoided by holding off on selling a home. It may be possible to eliminate the tax or reduce it in the future.
Not everyone wants to keep the old home when they make the decision to move on. The following reasons should be considered before a final decision is made.
1. Time and Hassle
For many people becoming a landlord is a joy. Others find it a hassle. Those who prefer the simple life and do not need rental money would be better off just selling their property.
Some people do not expect the financial and legal liabilities they encounter as a landlord. Maintaining two mortgages can be difficult and they also find they need to learn landlord-tenant laws.
4. Lender Rules
Mortgage lenders may require the present home sold before they will approve the loan for the purchase of another home.
It is possible to make huge profits from real estate investing, but many first time landlords find the expenses are more than they expected.
The good news is that there are solutions to all of the above. To avoid the hassle and time of dealing with rental property, a property management company can be hired. A bank loan can be avoided by finding a property with seller financing. Do a bit of research, talk to real estate professionals, and weigh all options before making a decision.