5 Factors to Consider When Deciding if You Should Rent or Sell Your House in Los Angeles

5 Factors to Consider When Deciding if You Should Rent or Sell Your House in Los Angeles

Should you sell outright or keep your current house and convert it into a rental property? Whatever the driving force may be behind your needing to move on to a new home and leave this one behind, you should make your decision about whether to sell or rent your home out, with an eye towards your financial future and planning for your retirement through passive income.

If you should find yourself asking this question, read on to learn about these five factors to consider when deciding if you should rent or sell your house in Los Angeles.

Equity

Suppose you’re dependent upon the equity in your existing home to purchase your next one. You don’t necessarily have to sell. If the numbers add up for a profit on the house as a rental,  this is an essential factor to consider when deciding if you should rent or sell your house in Los Angeles. You could access the equity through a home equity line of credit or HELOC to purchase your new home. If you should keep the existing property as a rental, you will also earn equity in the house, as appreciation will continue to increase the value. Another plus, when you do decide to sell, investors will find an income-producing property of particular interest, widening your buyer pool.

Market Trends

Current market trends must factor into deciding if you should rent or sell your house in Los Angeles. If predictors indicate market values will rise, it may be worth holding as a rental for a few more years to gain the added equity. Ultimately, you will have to use your judgment on the best move to make given the Los Angeles real estate market indicators. If rates are low and demand is high, it may be a wise move. If you don’t feel confident in your assessment, it is worthwhile to turn to a trusted family member or associate with experience with rentals. 

Capital Gains

If the property value has risen over the original cost or basis, your gain is known as the capital gain. Capital gains, taxed at a higher rate than earned income, are known as unearned income. If you’re buying a new home because of a job transfer and might be moving back Los Angeles, it may benefit you to rent and save on your capital gains taxes, making this an essential factor to consider when deciding if you should rent or sell your house in Los Angeles. If you’ve lived in the home for the past two years, typically, you can exclude up to $500,000 for married couples filing jointly. You should remain vigilant regarding current tax trends and upcoming proposed changes because you may need to recalculate your investment strategies.

Underwater

You might not have the ability to sell because you owe more on the mortgage loan than your home is worth on the current market, which is critical to consider when deciding if you should rent or sell your house in Los Angeles. While you will gain equity over time, you must also consider your risk tolerance until you can break even on the property should you decide to turn it into a rental property. In other words, you must also consider if your monthly cash flow and reserves could carry you through a severe drop in rental rates, serious repair expenses, or vacancies for the rental property over an extended period without causing financial ruin. If you’re unsure about what the market would bring for your property, compare the most like properties nearest yours which have sold recently, or you could hire an appraiser to provide a more accurate number. Talking your situation over with a professional investor, like those at Jennifer Buys Houses, may provide insight into your specific circumstances and help you decide the right move.

Passive Income

While your retirement isn’t at the forefront of your mind when considering selling your home, renting out properties as a long-term plan for passive income can build a significant nest egg. Homeowners can enjoy their golden years by converting their primary residence into their first rental property. The potential for financial freedom that homeowners can ultimately attain through real estate investments is crucial when deciding if you should rent or sell your house in Los Angeles. The BRRRR method is one example of systematic investing, buying properties that require rehabilitation, renting, and refinancing, using the instant equity you built. Then, repeating the process, continue to grow your Los Angeles real estate investment business and increase your current cash flow along with overall long-term passive income.

Why try to figure everything out for yourself when deciding if you should rent or sell your house in Los Angeles when Jennifer Buys Houses makes selling so easy. Jennifer Buys Houses buys houses for a fair price, as-is for cash, usually closing in a matter of days. Call Jennifer Buys Houses at (424) 242-9304 or send us a message.

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