Rent or Sell: Homeowner’s Cheat Sheet

Robert C. White • June 15, 2020

Rent or Sell: Homeowner's Cheat Sheet

It happens to everyone, eventually. Work calls for a relocation or your family anticipates another child and all of a sudden you have to move. When the unexpected occurs, you’ve got to be able to make a quick, smart decision on whether to rent or sell your current home. That’s why Robert C. White & Company created this cheat sheet. To help homeowners focus on a few key factors in the decision making process.

Your Property Value

The first thing to consider is fairly obvious, what’s your investment worth now and where do you see property values going? It is likely that your home is worth more now than what you bought it for. However, some towns and cities have not seen a real increase in property values over the last 5-10 years. In areas that have not experienced recent growth, it may make sense to hold on to your investment and rent it out while values increase. This is especially true if new businesses or revitalization efforts are generating momentum in your area!

Consider Renting If:

Current home values are low
Your property projects positive cash flow
Minimal make-ready is required
Low local tax rate
Anticipated increase in property values
Have time to manage tenants and maintenance items

Consider Selling If:

Home values are up
It’s a high volume sales period
Your property projects negative cash flow
High local tax rate
Declining location desirability
Don't have time to manage maintenance and tenant requests

Will It Cash Flow?

The next big thing is the potential cash flow of the property. Start by finding the expected market rent for your property (Link to rent analysis offered free by RCW!) with the help of a local real estate professional. Once you know the rental income your property would bring, it’s time to run the numbers. Below is the formula to calculate a property’s yearly cash flow and an example for you to chew on. Cash flow for the property here is $4,775/year, and positive cash flow is great!

Cash Flow = Gross Rental Income - Payments (mortgage/taxes/fees) - Avg. Yearly Maintenance Expenses

$4,775 = $28,200 (12 months x $2,350/month rent) - $21,600 (12 months x $1,800/month) - $1,825

Managing the Tenants

So you understand your property’s valuation and the cash flow to expect if rented, great! There is one more big factor in this…are you ready and willing to handle tenants? Being a landlord requires a high level of care and responsibility for tenants. This is someone’s home, so prompt and reliable service will be important to them. Dealing with tenant requests and maintenance can be time consuming and require lots of back and forth, but if you’re willing to develop sound processes and manage relationships efficiently, you're on your way to being successful!

A Final Word

Deciding whether to rent or sell is a choice you can make only after considering the options and analyzing the property as an investment vehicle. Use this cheat sheet to help make a smart and informed decision that you’ll be happy with!

Want to see how RCW manages properties in your neighborhood? Contact us!

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