Deciding whether to sell your home or become an investment property owner is something many active-duty service members will face at some point in their careers. And, unfortunately, there is no "correct" decision here - the right course of action is heavily dependent on your personal plans, the condition of your property and the market conditions of the area in which your home is located. If you're soon to be facing a PCS (Permanent Change of Station) that will take you away from the home you own, here are 5 things to consider before making that final decision of renting vs. selling.
1. What are Your Long-Term Plans?
Though your orders may be taking you away from home for months or even years, have you thought about what you might do after that time period ends? Are you nearing retirement or thinking of a career change down the road? Is the home you own located in an area that you could see yourself settling in permanently? If returning to live in your home permanently is an option you'd like to keep open, then selling may not be the best choice for you. Renting out the home in your absence is a great way to generate cash flow and cover your mortgage payment. Further, having renters in the home eliminates the worries that go along with leaving a home sitting vacant. And, if you hire a local professional property management company, you'll have someone in your corner screening tenants, handling maintenance issues and protecting your investment until you're ready to come back home.
2. How is the Sales Market Performing in Your Area?
Do you already have the home on the sales market but perhaps aren't getting the traffic you'd like? Just as there isn't anything you can do about your PCS, there isn't a lot you can do about a slow sales market except wait it out. You shouldn't force yourself into an unfavorable deal just for the sake of unloading the home - doing this could result in losing money and bring on unnecessary stress. If you aren't able to sell the home for the price you need right now, renting the home out is a fantastic option that will buy time until the sales market rebounds. You may have never set out to be an investment property owner, but in this instance, renting out the home is a great option as it will generate income for you while you wait until the market starts moving again.
3. Financial Benefits of Renting Your Home
We'd be remiss if we didn't mention some of the financial benefits that come along with being an investment property owner. For active-duty service members, these benefits are even greater in that they receive a tax-free housing allowance which usually covers most, if not all, of monthly rental or mortgage payments as well as have access to other special programs and tax breaks to make home ownership more affordable. That being said, a great benefit lies in knowing there is a built-in pool of potential renters nearby who are also receiving these same benefits. If the monthly rent on your home is kept around the monthly housing allowance rate of someone of a similar rank as yourself, you'll know that there are potential renters nearby who can fit the home into their housing budget.
4. Plan Ahead
This point cannot be overstated enough - the moment you know you'll be moving is the time to start making plans. Though you obviously have a lot going on in life, saving moving decisions until the last minute will only bring on extra stress and complications in the long run. Start doing some research as soon as possible so you don't have to make a rushed decision. Check into both the sales and the rental market - are houses comparable to yours selling at good prices? Is there a high demand for rentals like yours in the area? Regardless of if you're going the selling or renting route, start looking into market conditions as well as property managers and real estate agents so you have a good game plan together when it’s time to start making decisions. The last thing you want is to end up making a hurried decision instead of an informed one.
5. Decided to Rent? Hire a Local Professional Property Manager
If you've decided that renting out the home is the best course of action for you and your family, the next thing to do is find a great property management company. No, this isn't a requirement, but managing rental properties from thousands of miles away is a daunting, if not impossible, task. You need someone local who can regularly visit the property, meet the tenants in person, handle maintenance issues and protect your investment. Sure, you could ask your Aunt Sally to manage your tenants but is she really up for laying down the law about late rent or telling the tenants their 10 cats have got to go? Probably not. A professional property manager will have experience in all areas of managing a rental property from advertising and tenant screening to property maintenance and turnover.
How do you pick a property manager? The best place to start is where we start most things these days - Google. Find some property management companies in your area, read their reviews, check out their online presence and do a bit of homework on the company in general. See if they are members of professional organizations like NARPM (National Association of Residential Property Managers), BBB Accredited or have the Realtor designation. These are all good indications that you're dealing with true professionals who will work hard to protect your investment and abide by the letter of the law.
There is a lot to consider when moving away from your home and that is why planning early is key. Think about what you and your family really want to do in the long run, do some research and come up with a game plan. Service members can see some great benefits from becoming landlords and at Sweyer Property Management we take special care to help service members through the process, including offering a discounted management fee.
If you are interested in learning more about what it would take to get your home on the long-term rental market or are ready to schedule a no-obligation rental evaluation, please reach out to our team of experts today.