There will come a stage in your life when you will outgrow your luxury home in Santa Monica, and have to upgrade to a bigger house. Whether you want to look for a larger luxury house in Santa Monica or opt to relocate to another neighborhood, you will still have an important decision to make – to sell or lease the house.
This neighborhood is a popular area for families and couples, so you are bound to find interested buyers and renters. Before deciding between selling or leasing the luxury house, here are five things you should consider:
1. Determine Your Budget
First things first, you should determine your budget for buying your next house. Will you have a sufficient amount to make the down payment for the new luxury home without selling your existing house? Be sure to include the moving and closing costs.
Consult with your mortgage manager to see if you can get a mortgage loan without selling the existing house. Make sure that you tell them you want to turn the house into a rental. If you don’t have sufficient funds to buy your new house, then it is best to sell your current luxury house.
2. Estimate the Monthly Cash Flow
You should also estimate the monthly cash flow you will get if you rent out your luxury house. You must detect the expenses of the property, including repairs, vacancy, management, utilities, insurance, taxes, mortgage and more.
After all these deductions, will you be able to earn a profit every month after renting the house? If you are more likely to experience a loss, then it is better to sell off that property.
3. The ROI on Selling the House
Aside from determining the cash flow after renting the house, you must also determine the return on investment if you sell the house. Consider the selling costs, including closing costs, agent fees, lawyer’s fees, and other expenses.
Even though luxury houses on Santa Monica have a good value, you might not get enough profit after selling it. Considering that you will be moving into a bigger house, you will want to earn a substantial ROI. If the house is only getting you little to nothing returns, then it is wise to wait until the market improves to sell and in the meantime lease it.
4. Financial Planning and Tax Implications
Be sure not to make any decision without considering the tax implications and your current and future finances.You should consult with your financial advisors and accountant to determine the tax implications, if any, of selling your luxury house. An expert will suggest the best strategy for you to manage all the taxes associated with selling the house and your finances for the new house.
It is vital to seek help from your accountant to avoid making any costly mistakes. They will assess your financial situation to determine if selling or leasing the luxury house could be the best option for you.
5. Are you Prepared to be a Landlord?
Lastly, even if leasing the luxury house is financially the best option for you, the responsibilities that come with being a landlord may not be for you. It is not as easy as it seems. There are plenty of things you will have to manage. Being a landlord requires a lot of patience, particularly if you end up with a troublesome tenant.
Fortunately, you can always learn and improve your landlording skills and many tenants are manageable to deal with. Moreover, you can always hire a property management company to handle the issues of the tenant. However, you will have to consider their cost as well.
Indeed, leasing your or any other place is bound to be a risk. If you play your cards right, the value of your home may increase steadily and you can enjoy a hefty sum of monthly cash flow from your rental. However, things may go downhill for you too and leasing may turn out to be a bad decision in comparison to selling the house.
Fortunately, taking these things into consideration can help you in making an informed decision. Consult the experts to take the right step. Moreover, whether you plan to sell or lease, an experienced luxury real estate agent will give you an additional advantage.
Get in touch with Pezzini Luxury Homes, the top real estate agent in Los Angeles to find the right buyers or renters for your Santa Monica property. Our team will not only assist you in the selling or leasing of your house but will also find an ideal luxury house for you to call home. Dial 1-310-275-2076, and contact us today!