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Should You Rent or Sell Your Rehabbed Fixer-Upper?
It can be a difficult decision whether to rent or sell your newly remodeled fixer-upper. There are many factors you will need to consider before making the ultimate decision, such as how much money you have available and what kind of tenant you want.
In this article, Beta Abstract looks at some of the challenges that come with being a landlord and provides some tips for getting started on renting your house out. We'll also discuss hiring someone like property managers or landscapers to make sure it's well cared for while you're not there. Finally, we'll talk about the costs involved in both selling and renting it out so that you know which one is best suited for your budget.
Rehab Is Done! Now What?
After putting in months of your time, hard work, and money into rehabbing your property, it can be a tough decision whether to rent or sell. There is a lot to consider when making this decision. Here are some pros and cons of each:
Pros and Cons - Selling Your Property
Pros:
● You get upfront profit and can move on to your next property ● No ongoing stress of tenants ● No hassles of dealing with city rental permits ● No ongoing costs and time commitments of repairs and maintenance
Cons:
● Higher taxes ● No recurring revenue
Pros and Cons - Renting Your Property
Pros:
● Monthly income ● Ongoing tax benefits through depreciation, mortgage interest, and write-offs ● Providing a valuable service
Cons:
● Must continue to pay for upkeep or spend time fixing yourself ● Potential to deal with difficult tenants
Responsibilities to Consider as a Landlord
The main thing to remember as a landlord is that you have a duty to your property and the people who live on it. If you are renting, RentPrep notes that you want to find responsible tenants. Landlords should conduct thorough background checks and interview potential tenants in person before agreeing to rent out their property.
Doing this will help avoid issues where your house becomes a party zone or a haven for unruly tenants. The best way to avoid this situation is to find good tenants and make sure your house is well taken care of.
Here are some other important tasks you'll need to monitor:
● Hiring a property manager (if applicable) ● Maintaining your city rental licensing requirements ● Advertising for open units ● Routine checks of your property (ideally, quarterly or semi-annually) ● Ensuring your tenants have proper contact information for important resources like the fire department, police, emergency plumbers, etc. ● Forming an LLC for your rental business to shield yourself from potential litigation (learn more about what it takes to form an LLC).
Hiring Outside Help for Your Rental Property
Hiring someone to take over parts of your responsibilities can be invaluable. For example, if you have a busy job and don't want to deal with property management issues or you're not good at routine maintenance like landscaping, hiring someone like a professional property manager can save you time and money. This also greatly reduces the stresses of being on call 24/7 for potential tenant issues.
The same principle applies to any type of outside help you decide to hire. For example, if you don't know how to landscape or install fencing, hiring a contractor can be well worth the cost of their services. Use an online service directory to search for inexpensive fence companies near you to find well-reviewed, insured, and licensed professionals who you can trust to do the job and do it well.
Other important resources to have handy:
● 24/7 plumbers ● Handyman ● HVAC specialists ● Accountant
Consider the Financial Aspects of Real Estate Investing
There are many financial factors to consider when deciding between selling or renting your property. If you're looking for income, the monthly cash flow from rentals will be very enticing. Rental properties are also typically better for reducing your tax burden. Rocket Mortgage points out that if you've owned the property for less than one year, which is the case for most flips, you'll likely be paying high taxes on the profits. With that said, the large lump sum can allow you to buy additional real estate or deploy your revenue elsewhere.
Summary
All in all, the decision to rent or sell is dependent on your goals. If you're looking to build a portfolio of income-generating properties, you'll want to hang on to as many as possible. If you're looking to build your available funds, taking the lump sum may be better.
With that said, rental properties require a lot of work, even with a great tenant. You have to find the right renters, maintain your property, and be on call for issues.
In the end, each has its benefits and drawbacks. You should choose which one you feel most comfortable with - either is a great way to get started in real estate investing.
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