I apologize for not writing about our decision on whether to sell or lease out our old home earlier than today. I didn’t realize I left you all in the dark until this week! Shame on me.
The house has been on the market since January 26th. After careful consideration, we decided to put the home up for lease. Here’s why:
We will be able to rent it for more than our mortgage payment, including insurance, taxes, and fees. That means we will be able to pull in a small profit every month while still building up equity in the home. An extra $200 a month could really come in handy.
By keeping it as a rental property we can deduct the cost of repairs from our taxes. That alone will save us a good amount of money. We can also deduct the management company fees and the depreciation of the home. This means we can reduce our overall taxable income while still earning a slight profit every month.
The area is very likely to appreciate in value in the next few years. While the home used to be on the edge of town it is now considered a prime location. In the next year there are plans for more shopping centers, entertainment venues, and restaurants to be built within a mile of the home. The location is also perfect for accessing all the major highways (some newly built) in the area.
We like the idea of having our funds diversified. By owning a property we have our wealth diversified into multiple areas and not all in stocks or bonds. If we need to tap the money we have the option to get a home equity loan or we could always sell it in the future. Even though this form of investment isn’t exactly liquid we do have options just in case.
We didn’t need the equity to buy a new home or pay off debt. In my original plan, selling the old home would have provided the funds we would need if we went into debt from the move and carrying two mortgages. So far, we have avoided going into debt and we still have enough funds to carry the home for several more months. I’m a little bummed that we can’t build a screened sunroom yet (the money would have come from the sale) but I can wait. It will be a good savings goal for me to set for this year.
We might not have been able to get the price we wanted if we sold. Although our realtor felt we could get our target selling price, we felt a little uneasy because many of the recent home sales were at lower figures. Our area has not been affected by dropping property values yet but the credit crunch is everywhere. We would still need to be competitively priced despite the fresh paint and upgrades.
We also decided to go with the management company we mentioned. It will cost us $50 a month but we feel it will be worth it not to have to deal with the everyday stresses of being a landlord. We have received several applications on the property but so far none have panned out. I’ll write about those experiences soon.
Hopefully this decision will turn out to be the right one!
Image Source: mulad
