Should we sell or rent out our house using a property managment company?

Question

My boyfriend and I purchased our first home about a year ago, but recent unforeseen circumstances have forced us to move out of state early next summer to a more expensive area where we'll probably just rent an apartment (it's only a 4-year commitment). Given the current state of the real estate market and the fact that we've only owned the home for just over a year, we're not sure whether it would be wise to sell next summer. We've considered contacting a property management company to see if it would be worth renting out our house instead. Our mortage is only $525/mo., and I think the fair rental value of the dwelling is about $850/mo. I have no idea how much property managers charge for commission though, and I'm also concerned about other expenses such as taxes (~$800/yr.), insurance (~$400/yr.), maintenance, fees, etc. It would be nice to continue to build equity, but I'm still hesitant about whether this would be the most profitable decision. Any thoughts?

Answer 1

I always recommend rent. The economy does not need one more house on the market. There's plenty already.

Hire a management company, and make sure they are competent. Interview a few of them and get an idea how they operate. I usually charge $35/mnth for managing a property in Houston.

As a landlord, eventually you will realize a small profit and home equity. All you have to do is review management company reports.

Answer 2

Considering you are not legally married (which gives you zero legal protection if your relationship ends), and you have a substantial debt, do yourself a favor and sell the house, even if you have to pay taxes on it.

Managing a rental property is hard enough, much less having to do it out of state through a 3rd party.

I don't use a management company, because instead of babysitting tenants, I was babysitting the management company....no savings for me, and they can charge as much as $200 a month for their services.

There are so many people ruining their credit right now by hanging onto homes instead of letting them go.

You may not necessarily "continue to build equity"...equity is NOT GUARANTEED, and alot of people's equity is heading in the opposite direction.  So your best bet is to bite the bullet and let it go.

Answer 3

One thing you need to think about is if you will incur capital gains tax from selling your home.  I believe you have to live (own) in a home at least two years or else you'll have to pay capital gains tax.  Of course renting is always a pain, but could be worth it especially if you plan on moving back.  Personally, I wouldn't hire someone to do this for you - they'll charge more than it's worth.