If you think your apartment will serve you indefinitely, you are wrong. No matter how much you’re attached to your dwelling, you will have to step out of it as your family grows. And if you are reading this article, chances are that you have already reached that stage where you are contemplating whether you should keep your home or sell it away.
To make things easier for you, this article includes the:
- Benefits of renting an apartment
- Benefits of selling an apartment
- Key things to consider before making a decision
Why Rent Your Apartment?
Renting your apartment refers to signing a legal agreement that allows another party (tenants) to live in it as long as they pay the agreed-upon fee. Renting, generally, is seen as a way of earning a fixed income every month or a smart way to pay off your mortgage.
Key benefits of renting include:
- Earning a decent amount of money while you wait for the property value to rise
- Getting a security blanket for unprecedented times that could require you to move back into the same apartment
- Enjoying some tax deductions
Why Sell Your Apartment?
Selling your apartment can be a necessity in some situations, and an ideal option in others. Some benefits of selling your apartment include:
- Arranging the down payment for your next home
- Shielding yourself against a dropping real estate market
- Not worrying about maintaining multiple properties in different places
Whether you choose to sell or rent your home, you will inevitability deal with the positive and negative consequences of your decision. However, to make the right decision that best suits your circumstances, you must consider the following factors.
Compare the financial gains of selling and renting your apartment. To do this, you should deduct all your expenses associated with the property and assess if you’ll end up with a profit or loss. When the property value is too low, you can decide to rent your apartment and wait for a boom in the market to sell it at a good price. But this tactic can also backfire if you wait too long, and it may prevent you from getting a good return on your investment.
Did you know that selling your primary residence can exempt you from paying capital gains tax? In the United States, if you sell a real estate property and earn a profit on it, you will have to pay a certain amount of tax on your capital gains. But homeowners who have lived in their primary residence for at least two out of five years preceding the sale are excused. Renting your apartment, however, will mean that you will have to pay this tax.
The income generated from rent can help you pay off your mortgage. But renting an apartment comes at a cost as well. Potential expenses of renting your home are:
- Yearly property taxes that will be a percentage of your apartment’s value
- Landlord insurance fee which is more than the homeowner’s insurance fee
- Pre-lease and post-eviction maintenance costs that include cleaning, painting, fixing electrical items, etc.
- Replacement and repair costs of any damaged doors, windows, roofs, or major appliances
- Advertising fee when marketing your apartment for rentals
- Property management company charges
Dealing with Tenants
This is one of the major factors to consider when determining whether you should rent or sell your apartment. Selling your home would mean only minimal interaction with the buyer. Renting your home, on the other hand, means you will be dealing with your tenants more often than you think. Some questions to think about are:
- Do you have enough patience to deal with the problems of the tenants?
- Do you have enough time to dedicate?
- Are you aware of the rights of tenants? Are there any landlord-tenant laws in your city?
- How far will you be living from your rented property? Will you be able to manage things remotely?
You can, however, hire a real estate property management company that can take over the responsibility of looking after your rented property and tenants.
There is no clear answer to whether renting is better than selling an apartment or vice versa. You must keep the above-mentioned considerations in mind and make a decision that is in your best interest.
If you are looking for a credible property management company in Los Angeles, contact Pezzini Luxury Homes at 1-310-275-2076 immediately!