Should I Sell or Rent My Home

Ask Phyllis: a blog series of frequently asked real estate questions.

Should I Sell or Rent

Dear Phyllis,
I love your real estate column. My wife and I will be moving to Texas next year and the home we will buy will likely be in the $400,000 range. I want to sell our La Crescenta home, but my wife wants to rent it out because the interest rate is just 2.75% and she doesn’t think we should give that up. I understand her point of view, but I don’t want to be an out-of-state landlord. Do you think we should sell or rent my home?

Brian

Dear Brian,

Thank you for your kind words. I recommend that you discuss both options with your accountant or CPA.

I understand your wife’s point of view. Giving up a 2.75% mortgage is like letting go of a gold mine. Keep in mind that California is not landlord-friendly. Remember, during COVID, all a tenant needed to do was say the word, and they didn’t have to pay rent, even though the landlord still had to pay property taxes, maintenance, and, when applicable, a mortgage payment. Discuss with your CPA potential tax consequences, such as capital gains and tax exemptions, as you’ve lived in the home for at least two of the past five years. However, selling means losing out on future property value appreciation, and facing possible capital gains tax if exemptions don’t apply.

If you opt for renting, I think you should hire a property manager. Additionally, ask a neighbor for updates on the landscaping. Renting provides a steady income stream, which can be especially beneficial in retirement. Additionally, landlords can often deduct mortgage interest, property taxes, maintenance, and repairs, which reduces taxable income. This steady income stream and potential tax benefits could significantly boost your financial situation. Unfortunately, there is always a risk of vacancy, which can disrupt your income stream, and rental income can be affected by local market conditions and regulations. Tenant issues, such as late payments or property damage, can also arise.

Ultimately, deciding whether to sell or rent should align with your financial goals, market conditions, and personal preferences. Your comfort and peace of mind should not be overlooked in this decision. Feel free to ask if you need more specific advice tailored to your situation!