When the time comes to move into a bigger home or change neighborhoods, the decision to sell or rent always comes up. There is no right or wrong answer but there are three important things to consider.
Can you accept selling your home at market value?
For those who purchased their home before 2005, you have a chance to sell for a profit. If you bought after 2005, your home is probably worth less today unless you have done a major remodel. “How could you possibly know this,” you ask. Here’s how.
I looked at all the homes that sold in Virginia Beach in 2005, all the homes that sold in 2010, pulled out the ones that sold in both years, and compared the sale prices. I did not include the distressed sales, short sales and foreclosures. Of the 235 homes that sold in both years, 170 sold for less in 2010 than they did in 2005. Of the 65 homes that sold for more, nearly every single one was a major remodel.
So, first you must find out how much your home is worth. Click here to find out.
Another thing to consider is your debt to income ratio. If you plan to move into a more expensive home, you must ask your lender if you will qualify for the loan without selling your current house. Sometimes the answer is yes… sometimes no.
Not sure? I can help.
Will the rent cover the mortgage?
If the money coming in from rent will be more than your mortgage, you may want to consider renting. Many people who bought their homes with no money down or an adjustable rate mortgages are not in this position. I have talked to several people recently who pay $500 per month more on their mortgage than they get back in rent. Hopefully this is not you!
How do you feel about owning an investment property?
There are rentals everywhere but being a landlord is not for everyone. If you are moving out of town and plan to rent, a property manager can make it much easier but it will cost you about 10% of the monthly rent.
I have a great property manager if you are interested.
In the long run, it can be very profitable for someone else to pay off your principle and interest. Today we are potentially at the bottom of the real estate market. Buy low and sell high, right? Perhaps you should think about renting your current home rather than selling.
At the end of the day, most people make the decision based on how much their current home is worth. If they can sell it without writing a check, they will. The first step is getting a realistic assessment of your home’s value. Real estate agents are notorious for quoting unrealistically high prices to potential sellers just to get the listing (not me, of course). Click here to find out your home’s value.
Happy New Year! I have never been so optimistic about the future of the Virginia Beach real estate market.