So you have to move—is it better to rent or sell your home in the La Grange, IL area?
It happens to plenty of people—they get a job transfer, they get married, a sick relative or friend needs their help, their children relocate with their grandchildren, or they find they just don’t need or want a large home after the kids leave. Whatever the reason might be, people often find themselves needing to leave their homes. So, what should you do? Sell it or rent it?
Start with the math
You probably have a lot of emotion around leaving your home, even if it is for a happy reason. One of the best ways to avoid making a hasty decision about what to do with the home you have to leave is to start by doing some math. You want your heart to have its say, but be sure to lead with your head.
First of all, would renting your home instead of selling it provide positive or negative cash flow? You don’t want to go bankrupt hanging onto a property that is costing you money each month. Check out the local rental market. What is the average rent on similar properties in your area? Will that exceed the mortgage and expenses you may be paying for a new home in the new area? If so, renting may be your best option. However, if the rent in your area is lower than your potential new mortgage, let’s get your home ready to sell!
But the straight rent income to mortgage equation won’t tell us the whole story. If you are leaning toward renting, there are some expenses and deductions to consider. Expenses on the rental property include the mortgage, insurance, taxes, HOA fees, repairs (because they are still your responsibility), management fees and commission if you choose to use a realtor or property management company, advertising, vacancies (because there will be lag time between tenants), and other miscellaneous expenses like running credit checks on potential tenants. Bear in mind that all of these expenses are deductible on your taxes, but they are expenses, nevertheless.
And speaking of taxes, you will want to consult with an accountant with a specialty in real estate as tax laws do change. You will especially want to talk about capital gains tax in case you decide to sell your property in the future. In a nutshell, if you lived in your home for two out of the five years prior to selling your home, you may exclude part of the profit from the sale on your income taxes ($250,00 if you’re filing single or $500,000 if you file jointly). So if you sell your home after that five years has elapsed, including two years of primary residency, you will be subject to the capital gains tax. So be sure to get some input from that accountant prior to making your decision.
Consider the future
We may not be able to predict the future, but we can look at some trends and use them to make some educated guesses. First of all, are you planning to come back? If your move is temporary, it will probably be less expensive to rent your home and move back into it after a few years when a temporary job assignment is over or you move your parents closer to you.
However, you will also want to talk to a realtor about property value predictions in your area. In the La Grange, IL area, property values are predicted to continue to appreciate. And if your home is in the neighborhoods of South Stone Ave/West 47th St, Village Center, West Plainfield Road/South La Grange Road, or East Ogden Avenue/North La Grange Road, then you live in a La Grange neighborhood that has been appreciating the most since 2000!
Consider the expected growth in your area as well. Look around at your neighbors. Do they maintain their homes well, or do they let them fall into disrepair? If they let their yards die, collect junk on the porches, and allow cars with expired license plate rust, it may be time to jump a sinking ship. On the other hand, are local businesses doing well? Are new businesses opening nearby? Are new structures going up? Did your neighborhood just get a positive write-up in the local paper? If you can see positive growth, your property will appreciate. Look at the neighborhood as if you were going to buy your home all over again.
Taking on a second job–becoming a landlord
Becoming a landlord is like having a second job. Do you have the time and the personality for it? While you can do all the background checking legally possible to ensure you have good tenants, the fact remains, they will not treat your home the same way you would. You may get the dream tenants, and I hope you do, but you many get the nightmare tenants, too. Can you and will you be able to evict a tenant who is not paying their rent or abusing your property? Are you ready to take phone calls in the middle of the night telling you the pipes have burst or the heater has died in the middle of a blizzard? Are you even close enough to get to the property in an emergency?
If not, you could hire someone to do it for you. A property management company usually charges about 10% of your rental income to take care of these problems for you. Just be sure to research them thoroughly–read online reviews and ask your realtor about them. Many are great and very hands on. Others ignore problems until you are dealing with major damage and/or law enforcement. If tenants are complaining about them, steer clear. It indicates a lack of caring about your property and your financial interests.
Ask your heart
Now that you’ve done the math and all your other homework, it’s time to sit quietly and let everything gel. If the math didn’t pan out for renting, you have a pretty clear cut answer, even if it’s not the one you wanted. But if it still seems like a tie, you do need to think about why you might want to hang on to a property. Happy memories? Do you want to come back, but are not likely to return? Are you soft-hearted and perhaps unable to turn someone out of your property? Do you want to be free of a former life? It really depends on your reasons for selling or renting a property. But you have plenty of resources to help you make your decision. Nancy Miller is always eager to answer your questions and refer you to experts in her network. Best of luck in your new life–no matter what you decide!