choosing between selling or renting

[Edward Giyo]

We have a house in North Las Vegas, NV. paid off and worth around 450,000. We are decided to leave Nevada to another state. What do you suggest to do with the house, getting rid of it and selling OR keeping it and renting it. What would you do if you were in this situation? 

[Stephen DeThample]

Sell if you can use the money to make more money. If not, rent it out. 

[Eliott Elias]

Pull the cash out and rent it. 

[Conner Olsen]

Quote from @Edward Giyo:

We have a house in North Las Vegas, NV. paid off and worth around 450,000. We are decided to leave Nevada to another state. What do you suggest to do with the house, getting rid of it and selling OR keeping it and renting it. What would you do if you were in this situation? 

 I'd calculate your return on equity and then determine if you can make more investing that money somewhere else.

[Steven Foster Wilson]

Quote from @Edward Giyo:

We have a house in North Las Vegas, NV. paid off and worth around 450,000. We are decided to leave Nevada to another state. What do you suggest to do with the house, getting rid of it and selling OR keeping it and renting it. What would you do if you were in this situation? 

 Hey Edward, there can be benefits to both. If it will cash flow well, I would choose to rent it. You would have to ensure that you have a proper system in place for it though since you'll be out of state. You could learn more from here: https://www.biggerpockets.com/...

The other option is to sell that one property and buy a couple or more MFH that will cash flow well. This second option is ideal to generate more money.

[Victor Saumarez]

I sold a LV home this year before prices started to tumble. The reason for the sale was prices had peaked, but the main reason was the net yield (cap rate) was lower than what I could get in financial markets. The fixed income market is offering +5% for investment grade. CD's through brokerage accounts are offering +4.5% and some pay monthly. The other important point is the longer you delay selling, the less you will realize as prices continue to fall. 

A note about selling in this market. Expect buyers to be fickle. After all, they are catching a falling knife. Be realistic about your home's value. Don't expect it to sell for what homes sold for six months ago. Don't chase the price down with several incremental reductions. Buyers will read this as either a distressed sale and low ball you, or they will wait in expectation of further price reductions. So, get ahead of the curve by either pricing realistically, or reduce once or twice by a significant amount to get the traffic. Start from the basis of the minimum price you would accept. As long as the reinvested net gain still yields higher than rental comps the sale makes financial sense. If you are forced to lower the price below that threshold then it makes sense to rent. Good luck!

[Daniel Parrish]

How much is your equity position ? 

Is it more of 10 years worth of rent? 

What is the estimated rent payment?

[Scott E.]

Others have already asked good clarifying questions. Pending your response to those questions, I will throw in my 2 cents that it probably makes the most sense to do a cash out refinance at ~50% LTV, and hold onto the property and rent it out.

[Phillip Dwyer]

A few more things to consider:

1.  How long have you owned and lived in the property?  Are there possible tax advantages to selling now versus waiting?

2.  If you decide to rent it out, are there improvements needed to make it rent ready?  Is it a good rental property: low maintenance, good layout, no obsolescence?

3.  What is happening in the area immediately surrounding your property?  Is there are changing for the better, worse, or stable?  There's a lot of development happening in certain areas of NLV.  Some of that could be a good thing long term.  

4.  A lot of people are only looking at things through a 1-2 year lens.  What are your long term investment goals?  Does this property fit into that plan?

[Crystal Smith]

Quote from @Edward Giyo:

We have a house in North Las Vegas, NV. paid off and worth around 450,000. We are decided to leave Nevada to another state. What do you suggest to do with the house, getting rid of it and selling OR keeping it and renting it. What would you do if you were in this situation? 

 You've received a lot of good advice on this thread.  I'd turn the property into an asset that throws off lots of cash.

1. Determine what kind of cash you can get if you rent it as a long-term rental, versus a STR, vacation rental,...... Lots of different ways to cash flow a home if it is in the right location

2. Yes you can sell it but I'd research purchasing another asset & use the home that you own free and clear to obtain a home equity line of credit & use that credit for a down payment on an investment. It could be another rental or maybe a non-real estate investment.

Bottom line:  You own an asset that can create more monthly cash flow for you.  I'd leverage the asset and create the cash flow.

[Edward Giyo]

Thank you Crystal for your valuable input 

[Jared Prevost]

Hey now, let's not make this a dichotomy of only having the option to sell or keep as a rental. This sounds like the perfect opportunity to sell the house on either seller finance or a lease option. I'll break down the benefits below

Seller Finance

- Sell the property without having to pay traditional closing costs of listing and expedite the sale process

- Defer capital gains and potentially keep yourself in a lower tax bracket so you are taxed at a lower capital gains rate. Bonus points if you sell at a higher price and charge 0% interest so you don't get taxed on income on the interest

- You have the potential to recollect and resell the property if the buyer defaults. I would recommend selling on a land contract so you don't have to sign over the deed to the house until the buyer pays off the note

- You get to help someone buy a home when they wouldn't normally qualify

- High interest rates means you may be able to lock in really attractive terms for your buyer

Lease Option

- Lease out the property to a tenant who gives you an option fee upfront with a future purchase price

- Tenant will pay above market rent and it becomes like a NNN situation, you are very removed as the landlord.

- If the property needs work, it's the tenant's opportunity to build sweat equity in their future home

- If the tenant does not execute the option, you get to re-lease the property to another lease option tenant

- If and when you do sell to the tenant-buyer, you avoid the traditional home selling process and associated closing costs

Hope that's helpful for you @Edward Giyo

[Edward Giyo]

Quote from @Phillip Dwyer:

A few more things to consider:

1.  How long have you owned and lived in the property?  Are there possible tax advantages to selling now versus waiting?

2.  If you decide to rent it out, are there improvements needed to make it rent ready?  Is it a good rental property: low maintenance, good layout, no obsolescence?

3.  What is happening in the area immediately surrounding your property?  Is there are changing for the better, worse, or stable?  There's a lot of development happening in certain areas of NLV.  Some of that could be a good thing long term.  

4.  A lot of people are only looking at things through a 1-2 year lens.  What are your long term investment goals?  Does this property fit into that plan?

 we bought the house in Dec, 2012 and needs new paint and carpet. the house is in a very good condition. you can view photos below: 

https://www.zillow.com/homes/5...

[Edward Giyo]

Quote from @Daniel Parrish:

How much is your equity position ? 

Is it more of 10 years worth of rent? 

What is the estimated rent payment?

 the house is debt-free. monthly rent estimate: $2200

[Wale Lawal]

@Edward Giyo

Renting Your Home Could Provide Monthly Cash Flow

By keeping the house, you continue to build equity as you pay down the mortgage with rental income. Plus, the market value of the home continues to increase over time. If the house is in good condition, in a favorable rental location, and you have adequate cash reserves, renting could be a wise decision.

Renting can change your home from financial liability to a profitable asset. Landlords charge about 1% of a home’s value for monthly rent, or $2,200 per month on a home worth $220,000. As a rental owner, you will need to maintain cash on hand to cover maintenance costs and the times when the home is vacant. Most landlords maintain cash reserves of $10,000 to $15,000 per property.

To make a profit, you will need to find and keep good tenants and minimize vacancies. Before you decide to rent, consider what the home has to offer. As with home buyers, tenants are looking for neighborhoods with low crime, good schools, convenient shopping and other neighborhood amenities. The best properties show well and include all of the appliances and conveniences of the home. How will your house compete in the local rental market?

You may want to rent your home if…

• Rentals are in high demand locally
• You want to be a landlord
• The house offers appealing amenities that renters seek
• You are confident that you can make a profit
• You owe more than you can make by selling
• The local home-buying market is weak
• You have a personal attachment to the house

Selling Your Home Frees up Cash

Home values increase, on average, between 3.5 and 3.8% every year. A recent forecast by the National Association of Home Builders projected a whopping 14% increase in 2021 alone. If you’ve been in your house for more than a year or two, chances are you have amassed a good amount of equity lately. You may need that cash to purchase your next home, and there are other good reasons why selling could be the best choice.

The most important reason to sell is that you do not want to be a landlord. Managing a rental property requires knowledge of applicable laws, dealing with tenants, maintaining the property, and no shortage of financial issues. Many of these tasks can be hired out, but doing so cuts into potential profits.

Even if you want to be a landlord, your current house may not be a good fit. Maybe you are moving too far away, or the home is not in the right neighborhood, or needs too much work. You can always use cash from the sale of your home to invest in a better rental property.

You may want to sell your home if…

• It is a sellers’ market
• You don’t want to be a landlord
• The home needs lots of work before it will be rental ready
• You can’t charge a high enough rent relative to the home’s value
• The neighborhood is not enticing for renters
• You don’t have adequate cash on hand to cover vacancies and maintenance
• The house is not a good rental
• You have lots of equity
• You anticipate excessive maintenance issues due to age or condition of the home.

All the best!

[Mark H. Porter]

If you've lived there for two out of the last five years then you can sell it without gains taxes. $450K should warrant a 75% LTV which means you could buy a commercial investment around $1.8MM minus the transaction costs. We're finding very nice NN and NNN properties with +7% cap able to yield +$40K annually BTCF.

That’s only one piece of the story when comparing to what your house could rent for.  You’re also having your commercial tenant paying down your debt.

[Robert Adams]

Given your scenario I would recommend going with an OWC. Getting 20%+ down, interest only payments of say 10%, with a 2 year balloon payment.

This will get you $100k+ to use on other investments in the short term, good cash flow monthly for the 24 months, and should the market decline further you will not take those losses. If the buyer dafults you can take the home back and keep th $100k+ and then reassess your options at that point.

[Juan V Lopez]

Hey Edward, what a great situation to be in.

If it were me, I'd take cash out of it now with a cash-out refinance and keep it as a rental. 2 main reasons why:

1) In this market, you're most likely not going to get $450K for it. It may very well be worth $450K, but supply has exploded in Las Vegas (and other markets) with interest rate increases. Tough sellers market right now. Give it some time to rise again and consider selling in the future.

2) This is what investing is all about - if you keep this home as a rental and are able to acquire another, you now potentially have properties to pass down to your kids later in life. Keep your assets as long as you can. Wealth is built through ownership over time, not selling.

Regardless, I wish you the best and wish you guys a safe move. Take care.

[Scott Allen]

@Edward Giyo 

Rent it out and buy more!

[Michael Robbins]

@Edward Giyo If you do not mind being a landlord then you might consider renting it out.  But be ready for maintenance, tenant complaints, etc... If you hire a good property manager many of those issues will be taken care of.  However, you would still be receiving the bill for the furnace when it goes out or the water heater when it starts leaking.  I am myself a rental property owner, real estate agent, and property manager...so I would rent the home out.  But if you are not planning to grow your rental property portfolio I would take a pause and really thing about it.