It’s easy to get stuck trying to decide whether it’s a good idea to rent out your property. If you’re trying to decide whether renting or selling is the better options, there are pros and cons to each option.
We often work with property owners who are moving out of state, and today we’re sharing some of the things we talk about when we’re helping owners make this important decision.
Calculate and Evaluate Your Expenses
Before you decide whether renting out your property is a good idea, take a look at what your expenses will be. You need to start with your mortgage payment and then add the cost of your property taxes, insurance, HOA fees, and any ongoing maintenance items for things like pools and landscaping. Compare those expenses to your expected rental income so you have a general idea of how your cash flow will look.
Test the Rental Market
Now that you have an idea of how much you’ll spend on your property as a rental, you need to figure out how much you’ll earn. Understanding the rental market is critical; you need to look at what similar properties in your location are renting for. Many property owners check rental sites online such as Craigslist or Zillow. On Zillow, you can access what’s called a rental Zestimate. These tools can be helpful, but keep in mind you’re only getting an estimate. To get a more accurate estimate, you’ll need to talk someone who has experience with rental properties in your neighborhood. Price depends on the size, location, and condition of your home, as well as its amenities. It’s hard to compare those things to what you see online.
Many property management companies will give you a free rental analysis. You don’t necessarily have to sign up for their services, but it’s worth your time to see what they think about how much you can get for your rental property. At Portola, we like to err on the low side when we’re estimating rental value. This helps our owners to manage their expectations in case the rental price is lower than they expected.
Will You Return to California?
Before you decide to rent or sell your property, consider your future plans. If you’re planning to come back to the area, you might want to hold onto your house. Buying in California can be a challenge due to the large down payment you’ll need and the rising cost of housing. It could be more cost-effective to hold onto the real estate you have, rather than to re-enter the market in a few years. You might eventually decide to sell the property, but if you rent it out for a year or two, you’ve preserved the asset in case you need it.
Get Help from a Professional Property Manager
Working with a professional property management company is the best way to handle being a landlord and renting out your property. It takes a new urgency when you’re moving out of the area. Property managers understand the laws, they know how to handle leasing and maintenance, and they’re good at working with tenants. Don’t dive into the work that’s required to become a landlord if you aren’t ready or equipped. Work with a property manager who can be a local resource and an investment partner. Make sure you check in with your CPA or a tax attorney. A lot of the expenses with your rental property will be tax deductible.
If you have any questions about whether renting out your property is right for you, please contact us at Portola Property Management.