What advice would you give to help me decide whether to sell or rent my house when I move?
Decision making is tough. You go back and forth, never sure what makes the most sense. Deciding whether to sell your home or rent it out can feel like that. Most transferees choose to sell their house and buy a new home in the new location. But some choose to hold on to the property and try being a landlord. Here are a few questions to help you decide whether to rent the old house or sell it:
- Can you buy in the destination city without the profits of selling the old house?
If you want to buy in the new location, how will you make a down payment on another house? One way may be to refinance the old property or use an equity loan to get some cash in hand, but this may also raise the mortgage payments on the old property.
- Is the old home a special house you want to keep?
You may want to hang on to a home you like in the place the family will retire to, or a home customized specifically for your family, or a house that is highly likely to appreciate in value.
- Will you be returning to live in the origination area in the near future?
A recent tax law correction has changed the two-year waiting period for capital gains exemption for work-related moves. You can now take a prorated exemption. If you stay only one year before moving again (50% of the time limit), you can claim up to 50% of the maximum exemption.
- Can you afford to carry the old mortgage?
Whether a family can rent or buy in the new location while paying the old mortgage depends on lifestyle, income, and any corporate benefits. Rental income may cover part of the mortgage but often the rent isnt high enough to cover all expenses. You should be able to make ends meet even if the home stands vacant, the tenant defaults or other problems arise. Because of this, many lenders count only 75% of the rental income as real income when you apply for another mortgage. They often consider the other 25% of the rent to be a reserve against expenses and vacancies.
- Will you be close enough to manage the old property, or is there a reliable agent who can handle things?
Tax laws favor those who can manage their rental properties themselves, but if the distance is more than an hours drive, consider hiring an agent to manage the property. A long-distance landlord will need such help in finding good tenants, preparing a lease, setting the rental rate and, most important, overseeing repairs and maintenance.