Should You Rent or Sell Your Home?
You've decided to take a new job out of town or out of state and you aren't sure if you should rent your home out or just sell it. We've been in that situation ourselves more than once, so I speak from first hand experience. If you think your move will be temporary and you will come back to California is less than three years, I would highly recommend renting out your home. You can rent your home for up to three years without losing the chance to sell it with no capital gains tax. So long as you owned and lived in the house for two of the five years prior to the sales, any capital gain on the sale can generally be excluded. The saying goes "once you move out of California, it's hard to move back"! The main reason is the prices and how much they can go up from year to year.
There are several factors to consider when making the "sell vs. rent my home" decision, including:
- Your future housing plans.
- Your ability or tolerance for bing a landlord (you either love it or hate it!)
- Local market conditions for rental homes.
- CA state and federal incomes taxes.
- Your overall financial situation (can you afford to buy a second home, or can you just rent where you are headed?)
If you decide to rent out your home, be sure to charge enough monthly to cover your mortgage, insurance, property taxes, and maintenance. If you feel confident that your local market will justify these expenses, then you should be in good shape. Becoming a landlord means you will still have to maintain your house. Consider hiring a property management company if you really don't want to handle being a landlord and all that comes with it. They will be responsible for collecting the rent each month and will handle ensuring that any needed repairs are taken care of. They will charge a percentage and it will vary by company.
If you don't think you'll be moving back to California, then the biggest question you have to ask yourself is do you think home prices are going to rise over the next three to five years? If you think they will and you can afford to hold onto your home for one or two more years, then it might be worth renting it out and putting more profits in your pocket down the road.
We've been fortunate over the years to have fantastic tenants, but I've heard horror stories. The best advise I can give you is to hire a local real estate expert or property management company to handle the screening of the tenants and running the background checks. They will also be able to give you a good idea of what you can charge based on the location, condition, and size of your home. Prices in Culver City and the entire Westside are really high right now, so you want to make sure you have tenants that will take care of your home and be able to pay you on time every month. For example, Culver City rents run $2200 - $5895 for a town home/condo/single family home. The starting price for a single family home runs $3700/monthly. Don't hesitate to call us for advise or to bounce ideas off of us when it comes to all things real estate.