In the current market many sellers are giving consideration to keeping their home rather than selling, and turning it into an investment property instead of a sale. Either there has been little interest, or the asking sale price they have been hoping for is not being achieved.
In the meantime, their home is remaining vacant and non-income generating while waiting for a sale. In this article we suggest three questions to consider when weighing up your options around whether to hold out for a sale, or list your home for rent.
1. Can You Afford To Keep The Property?
The first consideration with this approach, not surprisingly, is whether you can afford to keep the property. That is, would the rental income generated by the property sufficiently offset the costs of holding it (mortgage repayments primarily). A rental appraisal will answer the question of how much the property could achieve on the rental market.
If you can afford to keep the property, there are significant benefits in holding onto it rather than selling. Firstly, you will have the benefit of ongoing income contributing to the mortgage repayments. But most importantly, you would be achieving capital growth as the property increases in value over time. In short, the longer you hold the property, the more money you are going to make long term.
2. Have You Considered Renting The Home Temporarily?
The decision to rent your home instead of selling does not have to be a "forever" decision. Remember that if the market is slow at the current time, and interest in your property is less than you expect based on previous performance, a suitable option may be to rent your property temporarily until the market picks up. It is quite common for a previously owner-occupied home to become an investment property for a short period, say 6-12 months, while the owners travel or take on a temporary work placement elsewhere, for example.
Renting your home out during the "down time" on the sales market can be a valuable way to bide your time until the market improves and you can achieve the sales price you are hoping for now.
3. Is An Equity Loan An Option For You?
The objective of selling may be to access money needed for other things. Again, at least in the short term, it is worth considering whether selling the property is actually required now or whether the money you require could be accessed via a loan against the equity you have in your home.
Remember, equity is the difference between the market value of your property and the amount you still owe on your home loan, and is commonly used to obtain money for renovations or by investors to help purchase additional investment property.
Importantly, when you sell you do not receive the full difference between what you owe on the home and the sales price. There will be capital gains tax, real estate agent fees and commissions, solicitors fees and stamp duty to consider. These costs of selling eat into the equity you've gained while owning the property, which is not the case if you borrow against the property rather than sell it.
Start With A Realistic Rental Appraisal Then Weigh Up Your Options
If you're wondering whether to hold out for a sale or try renting out your property, we recommend starting by obtaining a rental appraisal. Even in a slow sales market, rental asking prices remain largely unaffected. This can be a great first step in weighing up your options, and could prevent the home from remaining vacant while it could be producing income.
Carnelian Property Management Newcastle NSW
We are a family-owned and run Newcastle real estate agent offering expert property management across Newcastle and Lake Macquarie.