Whether you are upsizing or downsizing— let’s call it “right-sizing”— the question of whether you should retain your current property as a rental is solely dependent on your particular circumstances. There isn’t a one-size-fits-all answer. That said, the analysis is simple, although it does take some thought on your part.
When Keeping Your Current Property As a Rental Is a Terrible Idea
Two circumstances immediately come to mind:
- You need the money to pay for necessary expenses.
- You are a new/inexperienced landlord, and you plan on self-managing from more than a few miles away.
The first issue is pretty straight-forward— if you need the cash, sell the property! There is no point in stressing yourself out just to say, “I have a rental property.” Owning rental real estate is a business enterprise that requires time, expertise, and a clear-head to operate profitably. If keeping your property as a rental is going to stretch you to the breaking point financially and emotionally, then forget about it! Sell the property, pay off some bills, get your financial house in order, and revisit real estate investing down the road when your circumstances are more favorable.
As to the second issue, you need to be brutally honest with yourself — do you know anything about the day-to-day operations of a rental property? Do you want the tenant to have 24/7/365 access to your cell phone? Do you want to handle the inevitable 2 am calls? Do you really want to drive 45 minutes each way, at 11 pm, when a tenant calls you because they’ve lost their key? Are you up to date on all civil rights laws, disability laws, fair-housing laws, and tenant/landlord codes and regulations — federal, state, and local? Are you prepared to handle evictions and security deposit disputes?
To make a good decision— the right decision for you— it is important that you evaluate your current finances and lifestyle needs to determine if real estate investing, at this time, makes good sense. This is an evaluation that only you can make, but by all means, consult with your financial/tax/legal advisors when making this decision.
When Keeping Your Current Property As a Rental Is a Fantastic Idea
If you don’t have a dire and immediate need for the cash, then holding on to your current house or condominium unit as an investment property could be a fantastic idea for you. After all, the most significant single source of wealth creation in the world comes through holding real estate for both income and long-term appreciation. If you already own a desirable piece of real estate, it often makes great sense to hold on to it as a rental.
Once you’ve decided to lease out your property, your next decision must be whether to self-manage or to have the property professionally managed by a property management company. Some things to consider:
- How much time do you have? Are you willing to devote several hours per month, every month, year after year to managing your rental portfolio: keeping the books; complying with laws; preparing taxes; advertising and showing the property; lease preparation and signing; maintaining security deposit accounts in compliance with the law; rent collection; late notices; evictions; conducting move-in and move-out inspections; repairs and maintenance; being on-call 24/7/365, even during vacations and holidays?
- How far will you be living from the property? Time has proven that self-managing landlords who live more than 30-minutes from their properties often find it very difficult to manage their properties themselves.
In my experience, the only landlords who end up successfully self-managing their one, or two property portfolios over time are those who are retired and live within a few miles of their properties. They have plenty of time, few obligations, nothing much else to do, and are grateful to be able to plunge a toilet or tighten a doorknob.
That’s not to say that if you realize that you have enough on your plate, and taking on property management responsibilities is not something that you want to do, that you should not keep your property as a rental. The logical solution is to hire a professional property management company to handle the day to day operations, bookkeeping, repairs and maintenance, showings, and lease preparation, etc.
To learn more about the questions to ask and the things you should look for when considering hiring a professional property manager, follow this link for the free report, “Your Guide To Finding The Best Sarasota Area Property Manager.”
In Conclusion
When moving, the decision to keep your current property as a rental, or to sell it, is a common question. The answer greatly depends on your current financial situation. Sometimes selling your property is the obvious way to go, but if your finances are in good order, keeping the property as a rental is often a very wise and profitable choice.
Whether to self-manage or have an experienced professional take on the liabilities and hassles of day-to-day operations, is mostly a lifestyle decision that depends on your tolerance for disruptions and your willingness to be on-call 24-7. Of course, it is always a good idea to consult with your own financial/legal/tax advisors when making such a decision.
Your Next Step
If you’d like to discuss professional property management and everything it entails, and how you might get started, you can contact me here, or call me direct at 941-225-8185. In the meantime, download our free guide, “Your Guide to Finding the Best Sarasota Area Property Manager.”
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