Should I List My Property For Sale or For Rent?

When it comes time to move for whatever reason; a new baby on the way, a job transfer or you simply want a change of pace, the initial instinct for many is to list their property for sale. The basic logic makes sense. You want to cash out and use that cash for your downpayment on a new home. However, we’re finding that many would be sellers are now considering holding onto their property and renting it out for the added cash-flow and to have a tenant help pay down their mortgage. This blog will be dedicated to asking you some basic questions so you can help decide if you should list your property for sale or list it for rent.

How much can you get in rent for your property?

The first thing you need to do is determine how much you can rent your property out for. If you cannot achieve a high enough rent amount to pay for your holding costs (your mortgage, your property taxes, association dues and insurance) then you need to consider if it is worth it for the difference to come out of your pocket.

Make sure you work with a Realtor who understands the rental market well. The rental market is starting to change and will continue to do so over the coming years (and not in the landlords favor). Make sure you also consider what time of year you are renting out your property in. For instance rents are typically much higher in May than they are in November.

Does your association have any rental restrictions?

Well, maybe this should be the FIRST thing you look into instead of rental price. Some associations prohibit rentals. Make sure yours does not! Other associations may have a rental cap and if they have met this cap (number of units they allow to be rented at any given time) then you may need to be added to a wait list before you can rent out your unit. Check with your association management to confirm any and all rental policies and restrictions. For instance, did you know that some associations may be pet friendly but do not allow renters to have pets?

Do you NEED cash from your current property to buy a new one?

If you’re buying your next property the question is can you afford to buy it without selling your current home. Look at your finances and talk with your mortgage broker regarding this. Do you need to sell in order to have 20% down payment? Or are you OK with just putting down 5% on your new property? Balance out the costs of this as putting less than 20% down typically means you’re responsible for PMI (Private Mortgage Insurance) which will increase your monthly costs on your new home.

What is the interest rate on your mortgage?

I was speaking to one of my clients recently who was deciding whether to rent or sell. She said her interest rate on her 30yr fixed mortgage was 3.35%. That is VERY cheap money! That played a role in her decision process of whether or not to rent or sell. She ended up renting out her place. If you have an incredibly low interest rate it might be a good idea to hang onto that property and rent it out.

Will it be difficult for you to manage the property?

Some condos are very easy to manage because the building maintenance staff can help with any issues that arise inside your unit. Other buildings may be self-managed and this may mean anytime there is an issue you will need to hire someone to come in and fix the problem. This should be taken into account. For instance, if you’re living in the same city as your rental property then management can be very easy even if you’re in a building that does not have maintenance staff. Conversely, if you are moving to Hong Kong for work then it might be difficult to manage your property especially given the time difference.

Can you hire local property managers? Sure, but there is a cost to that so you’d need to factor that cost into your decision.

What will be the financial state of your condo association in the future?

I have some clients who own properties in buildings that are on the downward spiral. There might not be any special assessments planned but my clients are seeing the quality of the building deteriorate and they’re worried that the building may have financial issues in the future. This is definitely something you need to take into account when considering whether your should rent or sell. Sometimes it might be better to sell, take your profits, and run!

Are you cash strapped?

There is no way other way to ask this but, are you living paycheck to paycheck? If you are then being a landlord might not be for you. It is important to have some cash saved in case you have any tenant issues or any property issues. Landlords need to understand that when tenants move out they’ll likely have to paint the property and make some minor repairs in order to get it ready for a new tenant. Do you have the cash to do that? If your dishwasher breaks can you replace it for the tenant ASAP? If your Washer / Dryer goes out can you replace it ASAP?

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com

Should I Buy or Should I Rent?

 

 

Ah, the age old question in real estate. Should I buy or should I rent? Well, if you ask any standard Realtor they will tell you BUY! But, if you haven’t figured it out yet I’m not your standard Realtor. I try not to drink the Kool-Aid and instead give you unbiased and practical advice. So in this quick blog I’d like to ask you some questions to help YOU figure out if you should Buy or Rent in Chicago.

Do you know where you want to live for the next 2 to 3 years?

This may sound like an obvious question, but it is a question most people don’t ask themselves. They may want to buy for the purpose of buying, but may focus more on what they can afford versus where they truly want to live in the next 2 to 3 years. So the question I ask you is, where do you want to be? Can you see yourself living there for the next 2 to 3 years? If so, then you’re at least one step closer to buying.

Can you afford home ownership?

Some sales people may say “You can’t afford NOT to buy!” Umm…yeah, whatever…that’s not the right answer. What I mean by, “Can you afford home ownership” is after purchasing the home will you at least have some sort of a financial cushion in the event there are any issues with your home. This can be small things like needing to replace an appliances to larger items such as roof repair on a single family home or a special assessment in a condo building. As long as you have some sort of cash cushion then you’re again one step closer to buying.

Is your family situation stable?

OK, this sounds like an odd question so let me explain what this means. Are you in the process of getting married and thinking of having kids in the next year? If so, then you might want to be looking to buy a place larger than a studio! Sounds like a silly question but you’d be amazed at how some people jump into things. Take your time to consider this. Let me give you good example of clients of mine who did the right thing.

I had a couple contact me off my blog about 4 years ago. They were an absolute delight to work with. We got along extremely well. They were looking at 2 Bedroom condos in River North / Streeterville for up to 375k. However, as we were looking over a month or so, they also started thinking more. They decided to put the search on hold for a bit to decide what they wanted and needed for themselves. A year later we were back on with our search and this time they were married and planning to have a child. Their search criteria now changed to a 3 Bedroom with lots of living space in the areas of Lincoln Park and Lakeview and now they upped their budget. They simply took some time to think about their situation and then they made a wonderful purchase where they will definitely be happy for at least 5 years.

What are you willing to do with your property in the future?

I’ve had some clients who have purchased a property knowing that in the next year they’ll likely move out of town. They still wanted to buy because they planned to rent out the property if they moved and planned to keep it as an investment. If you think you might be moving soon then buying might not be for you, or it might be if you have different goals for the property you are buying. However, if you are thinking of buying and renting out your property then you need to make sure you plan accordingly and purchase accordingly.

What tax laws will benefit me?

The interest deduction is a major factor for many buying today. The ability to write off interest (please consult your tax advisor as everyone’s situation is different!) on your home mortgage is a motivating factor for many. How much will you actually save if you buy? For many this could help make or break the decision in whether or not you should buy.

What is going to make you happy?

Making money on your home is a wonderful thing but focus on where you will be happy living. Look for the maximum value, but remember your happiness is a big part of that value consideration. Would you rather live in a property where you make only 1 to 2% appreciation a year and be extremely happy or would you rather live somewhere that is not your ideal location, but instead have a great chance of return down the road. Everyone is different, but only you can answer that question for yourself.

In some instances people can only be happy if they can remodel their kitchen and make their home exactly how they want it, which is something you cannot do if you rent. So again, if this is you, you’re one step closer to buying.

It is only a decision you can make

It is not a decision your Realtor can make for you, or your friends, or your mother. It is only a decision you can make for yourself. Take all of the above into consideration and make an informed decision.

 

Paul Blackburn is a licensed Real Estate Broker and Realtor with @properties in Chicago. Paul has been selling real estate since 2007 and is a broker and trainer for the Skowron Group which has sold in excess of $100 million in 2016 alone. For further information or questions please feel free to contact Paul directly at Paul@pkblackburn.com