I am at the stage before newbie when it comes to rental properties. We are debt free, in great financial position and are considering moving. My question is would it be better to sell our house or to rent it out. I know that to answer this a lot is determined on what is needed when we move, but the framework of my question is based upon the assumption that my family will not need the cash from the sale of the house or from the rent. I have always been told that it is best to be close to your rentals but in our case, we could be on the opposite side of the country.
Is the house in a location where renting it would make sense: Decent demand, covers all expenses + cash flow (assuming yes on these b/c of debt free)? It might be worth talking to a local realtor/Prop Mngt company about options before making a decision. I have some family in a similar situation ~7yrs ago: Central PA, moved to Texas, then moved to Ireland. Out of PA for around 5yrs and successfully rented their house the entire time to one family, and still renting it today after moving back.
It can definitely work if you have someone local that can manage the property (PM group), or if self managed just check on the property for you once in a while.
You also have to think about the tax consequences of keeping your current home and turning it into a rental.
You would want to check with your CPA about loosing the rollover benefits. You might have to pay capital gains taxes on the rental at some point and loose your rollover.
You really need to run the numbers. How much could you rent it for and what are all of the costs (including taxes, repairs, vacancies, etc)? not all home make a good rental. Also as someone mentioned, what are the capital gains tax implications? I'm not in the US, but I believe you can use it as a rental for a couple of years and still avoid capital gains. Check with an accountant.
Thanks for the advice everyone! I think that finding someone local here to be the PM will be challenging and since I am a novice, this could be a challenge to start with. That being said, I did not even consider the capital gains on the house if we were to sell and it is no longer our primary residence. I will definitely talk to an accountant. Thanks for sharing your sights!
Figure out how much you'd have after a sale, and see what types of rentals you could buy with that near your new home.
if not in a 6%+appreciating market i would sell assuming no cap gains, reinvest in 6%+ market to offset inflation at least
One argument to keep the house is if you decide to sell, you will lose approx 8% of value in the house(6% in realtor commissions and 2% in overhead costs).
One argument to sell the house is that you are able to take advantage of section 121 exclusion - Only applicable if you owned and lived in the house for 2 out of the last 5 years.
Whether you should keep the house as a rental depends on your thoughts on the market - Do you think the area will continue to appreciate compared to other areas that you are analyzing?
Do you feel like market rents will continue to rise?
best of luck in your decision.