To sell or rent - that is the question…
I have noticed a lot of homes listed for sale whom have been on the market for what feels like an eternity. This is no dig at your home or your listing agent. Some haven’t moved after even hundreds of thousands in sales price decreases. This is unfortunately the landscape of the housing market in recent months. Interest rate hikes have squeezed the affordability of buyers and is slashing the equity of home owners. There is a decent increase of inventory in the last six months to a year and unfortunately for those listings, the buyer pool has been stifled. During recessionary times like we are potentially facing the circulation of money tends to slow down and people are less willing to open up their checkbook. Spending money on everything except the essentials is usually how recessions are handled. Pleasantry’s go first, subscriptions are sacrificed next and we are left with the bare minimum, food, shelter and water. So, your house may not be selling; but potentially, it could get rented.
Of course, every individual situation is different, there are some that may need the money out of the property and selling it is the only way. That is a difficult situation to be in and I hope that you are able to sell the property and fix your dilemna before it is to late. For those not in a completely dire situation, like being strapped for cash, renting instead of selling might be a good option. Here are a couple reasons why.
Timing
Renting your property to a qualified renter can get you through recessionary times and to a better time to sell. Recognizing that you may have missed the high times in the market is a tough pill to swallow. However, if your property is clean, updated and in a desired area there is most likely a demand for that property to be rented. Rented for potentially a return as well.
Return in the form of “Cash Flow”
Cash flow is possible if you rent your property for more than it costs you to service the debt owed. If you have a $1,900.00 home payment and you rent your home for $2,000.00 with no other expenses you have a net profit or cash flow of $100.00. Although that profit is nothing to brag about; it still beats a sharp stick in the eye or a house sitting on the market empty costing you the owner the mortgage payment.
Return in the form of “Principal Paydown”
If you have a mortgage you have something also known as principal paydown. Let’s bring up our scenario again where you have a mortgage of $1,900.00. This number is made up of your interest, taxes, insurance and principal. No, not the principal of your kid’s school. But the principal of the debt owed. The majority of the interest is paid up front and over time more of the $1,900 payment will go towards the principal. This is called, amortization schedule. For simplicity let’s just say that $1,400 of the $1,900 is paid towards the interest, taxes and insurance and the remaining $500 is towards your principal debt. So if you owed $100,000 last month, next month you owe $999,500. Although this money is not going directly in your pocket. It is; however, $6,000 of return every year that the renter paid for. Add in the cash flow and now that’s a hell of a lot better than a sharp stick in the eye!
Given the uncertainty of the economic landscape; being willing to look at options is necessary. Excuse my honesty, but selling your home may just not be in the card’s right now. Renting is a viable option for owners to weather the storm. We at Lake CDA Property Management are here to help take any stress off your plate. We have helped a number of owners recently who were unable to sell and we filled their home with respectful tenants for a cash flow profit to the owner. We offer full service management of your property for less than the local competition and we put more emphasis on you as the owner in treating your property like it is our own.
Whatever you choose I hope this has given some perspective in navigating these uncertain times. We wish you all the best in your journey.
To your success,
Colton Haaker
Lake CDA Property Management
