Should You Rent Your Home?
A scenario: You find a great job in another state. Do you sell or rent your home? Think about reasons for maintaining ownership. Do you want to keep the home in case you ever move back? Are you looking for a tax break through property depreciation? Do you want the home as a retirement investment? On the other hand, are you prepared to be a long-distance landlord? There are other costs involved as well, often running 30-40% of income before the monthly mortgage cost.
If you decide to rent the home, where do you start? Get the house in shape, including interior and exterior painting and patching, carpet cleaning, appliance tune-up, ensuring adequate insulation, and fixing what needs fixing. A property management company can research prices in your area, or you can look in the real estate section of your Sunday paper. Diana Valin at The Rental Xperts will be able to shed some light on your situation. She's one of the larger volume rental management companies in North County San Diego.
It’s not essential to hire a property manager, but it can make life easier, especially if you move out of the area. Interview at least three companies. Ask about accreditation, customer service, references, screening, experience, vacancy rates, maintenance, monthly reporting, handling evictions, insurance, fee structure, dealing with prospective buyers, inspection of the property, and any special services. If you're just curious about what your home might rent for, go to RentOMeter and they'll survey other rental properties in your area and show you the average.
One other thing to consider is the cost of renting your house. The key is finding the ideal tenant with great credit and a track record of responsibility. Repairs and damage to your house has everything to do with a responsible tenant. You'll likely need to paint and carpet after they move out and that amounts to several thousands of dollars so factor that into your profit and loss statement.
Lastly (this applies to the state of California), you'll loose your capital gains exclusion on a primary residence if you do not live in your house 2 out of the last 5 years. That's $250,000 for a single person and $500,000 for a married couple. If you have capital gains on your house you may be faced with moving back in after 3 years or just selling it before that deadline happens.
If you'd like more information on rentals or how best to deal with them, feel free to contact me directly.