Today, I would like to discuss the decision of whether to sell or rent your home. This topic has become personally relevant to me as my adult daughter recently approached me regarding their home in Arizona. They are planning to move back to California but are unsure whether they should sell or rent their current home. I would like to share the advice I gave to her.
Firstly, it's important to understand what most homeowners consider when faced with this decision. They often hope to sell their home for the price it was worth back in the summer of 2022 when the market was incredibly strong. During that time, buyers were making non-contingent offers, even waiving home inspections, and providing sellers with rent-back agreements for several months. However, it's worth noting that current home values in San Diego and Southern California are still slightly lower than they were last summer, despite some recent increases in the past few months.
Secondly, homeowners also take into account the attractive low mortgage rates they currently enjoy, thanks to refinancing a couple of years ago. With rates ranging from high 2% to low 3%, the idea of selling and trading up to a property with a 7% mortgage is not particularly appealing. Renting out their current home and maintaining the attractive mortgage rate becomes an attractive option, especially considering the high rental prices landlords are currently benefiting from. This allows them to potentially generate positive cash flow.
Returning to my daughter's situation, she and her husband purchased a home in Arizona in early spring 2022. They acquired a spacious and valuable property compared to what they could get in San Diego or the rest of Southern California. However, they didn't anticipate or perhaps forgot about the intense heat in Phoenix during the summer. They found themselves wanting to leave as soon as possible.
So instead of selling, I advised them to take advantage of their 3% mortgage and rent out their home. They managed to secure a one-year lease from a quality tenant that yields $800 per month in positive cash flow. Now, as they return to San Diego, they own two homes, with one of them being paid off by a renter. This approach offers a great opportunity to build long-term wealth. Of course, this strategy might differ if you need the money from your first home to purchase your second home.
If you're interested in determining whether selling your property or renting it out would be more beneficial, I encourage you to visit www.pennyrealty.com and also check out our Rent vs. Sell Calculator on our website. This will help you crunch the numbers between the two options. You can also always give me a call or send me an email. I look forward to hearing from you!