Is it better to rent or to sell your Coral Gables home in case you are moving out?
Many Coral Gables home owners are sure they want to sell, but undecided on whether they should sell their current home or wait for a later moment in time and rent until then. As I’m known as a Miami market analyst, I get many of these calls to help home owners make a financially sound decision. In this blog I discuss the questions one needs to ask in order to make the best decision on whether to rent or to sell a Coral Gables home.
To Sell or to Rent a Property | Questions to ask
Is the market going up or going down?
In an upward market it is better to rent the unit until the market is about to reach its peak. This provides you with a nice asset appreciation, which adds to your cap return. One big question that owners have is ‘If I wait can I sell the home for more later on?” With this in mind we often ask questions to ourselves like: “What could hurt the market?”: Certainly raised interest rates, reduced benefits for homestead exemption or “What helps the market”? Such as tax incentives for high tax states like NYC, and California.
In a correcting market, depending on how heavy the correction is, one should decide between holding on to the unit a bit longer or selling it right away before the market shifts from “Oversupply” to “Recession”
What is the condition of my home?
If your property is really nicely done, the premium you get when selling can disappear if tenants don’t like looking after it, and it devalues the product.
Is it the ideal ‘rental property’?
Some homes lend themselves to great returns while others are limited. Tenants don’t value property in the same way that end-users do. For example, end-users will value condo elevations, finishes, views, HOA fees and financial stability of a condo much more than renters do.
Are there better properties to buy to get the same return or better, and put more money in your pocket?
Here is an example: If you own a home of $2,5M, you should get a $15K monthly return on your rental (Rule is $6k return per $1M invested). If you won’t get that (lets say you get $11K) is it not better if you could own two townhomes for $1M a piece and get $6k per month from each one plus $500k in your pocket or a third property that could yield you $3,000 per month. The other element that is worth to be aware of is that owning the investment property is also about asset appreciation. In the lower price markets we cannot un-typically experience a 10% increase in home value over a year, while the upper market experiences a totally static market. Typically, bigger homes appreciate slower than entry level homes ($1m). Let me give you an example to explain. If you rent a big home for 3 years and get $12,000 per month but the value changes marginally from $2.5m to $2.7m over 3 years you only make $200,000 on appreciation when you sell. If you were to buy 2 x $1,250,000 homes they could quite easily appreciate from $1,250,000 to $1,600,000 over 3 years, which provides a profit of $700,000. Obviously you are $500,000 better off with the latter option.
How do you feel about being a landlord?
How do you feel about a late night call “The air-co is broken” or “The washing machine is leaking”. Homes are far more complicated propositions than condos. They certainly draw better income, but they are more ‘labor intensive’ . Houses have way more moving parts than condos, so you have to be ok with handling issues
To rent or to sell my Coral Gables home?
The 2018 Coral Gables Real Estate market is a bullish market. The inventory is rather low being pre-dominantly a neutral to a sellers market in the price range below $3M. The higher-end of the market shows higher amounts of inventory, especially for dry lots, although nothing alarming. Prices are remaining stable or adjusting slightly. With the current market conditions this market is likely to grow slowly but steadily. The Gables market has been a steady market in the last few years. While many markets saw heavily inflated prices followed by price corrections, the Gables has been more balanced.
So the market is expected to see increased values, which means you can go either way. Selling your property today will not pose any issues, renting it our will also be profitable. The question is just what can you sell it for today vs what can you rent it for today and what will get you more money in the long run. Your Coral Gables asset is expected to increase in value so if you do not need the funds of this home to buy another one you might opt for renting your house. You could also pay-off your new home’s mortgage with your rental property.
As a general rule of thumb we advise people to get a $600 return per month for every $100K invested. Lets say you have a $2M dollar Coral Gables home. This should rent for $12K. Of course the higher-end homes are often harder to rent. Many people in this price range will prefer to buy their own home. For that reason if you are looking to rent for pure income purposes you might opt for 2 smaller properties with higher rental marges.
Contact David Siddons to see what your potential Rental or Sales Value would be now or in the near future!
David Siddons | David@siddonsgroup.com | +1.305.508.0899
David Siddons is a Miami top-producing realtor with over $65M in yearly sales. David lives in works in Coral Gables and is known as a market analyst among peers and clients!
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