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Our team at Grace Property Management talks to a lot of homeowners weighing their options between converting their primary residence into a rental property or selling. It’s not an easy yes or no. Here are six questions to ask yourself when trying to decide:
- If I didn’t own this home today, would I buy it as a rental property?
The answer is usually no! Don’t assume that just because you own the property, that it is a good rental property. Sometimes it is better to sell and acquire a different property better suited for a rental opportunity.
- How much will my net profit be per month?
The net profit is the money leftover after all expenses. Consider your rental income minus expenses like mortgage payment, property taxes and insurance, any repairs the property may need, homeowners association fees, etc. You should also factor in the fees associated with property management and vacancy.
- Can I emotionally detach from the home?
If you are not able to detach yourself from the home emotionally, you probably shouldn’t rent it. Rental properties should be treated like a business. If you still hold sentimental ties to the property, it may not serve you to rent it out to a stranger.
- What are my long-term plans?
If you’re moving somewhere temporarily, then maybe renting the property to move back into at a later date is a sound decision. However, if you are planning to move out of the state and never look back, selling may be the better route to go.
- How far away will I be?
Geographically, where will you be in proximity to the property? If you’re staying in the neighborhood, it may be easier to continue owning the property and operating it as a rental. However, if you’re moving beyond state lines, it could be tougher. Also remember you will be much more reliant on a trusted property manager to handle the operations of your property.
- What are the tax implications?
This is a significant consideration to factor in. The government offers homeowners special breaks that don’t always transfer to real estate investors. You could potentially sell your primary residence tax-free. However if you convert to a rental property and then sell, those proceeds are no longer tax free. It’s best to seek a tax professional for advice on this.
If you’re thinking about moving and converting your home into a rental property, give our team a call at 303-255-1990. We are happy to serve as a resource in your investment journey.