Do you love your current home but find yourself needing something new?
Unfortunately you can’t live in two places at once so, it’s time to decide. Do you sell up or do you rent out?
There are pros and cons to both scenarios which should be carefully considered based on your personal and financial situation as well as your lifestyle goals.
What are the costs and benefits of selling an old property?
As everyone’s circumstances are different, there is no right or wrong answer to this dilemma. However, there are some things you need to consider when sizing up your options.
If you’re moving out of your first owned home it can be an emotional experience as you come to part with old comforts and memories. If you can’t separate your emotional ties to a property, trying to sell can be an anxious process that may cause you to regret your decision. On the other hand, if you’re not particularly fond of the idea of allowing tenants in your property, selling up could be your best option.
Nonetheless at Leasing Elite we have exemplary tenants who will look after your home as if it were theirs.
The greatest benefit of selling your old property is using the money from the sale as a deposit to buy another and leverage the money made from the sale to continue to build your property portfolio. It provides you with more financial flexibility and allows you to use your assets to further your wealth. For example, you wish to buy a larger property for your family valued at $1,250,000. You sell your current property for $750,000 but you still have a $200,000 mortgage on it. By selling, you will have a $550,000 deposit to put towards the new property. This reduces the amount you will need to borrow from the bank and can be the more suitable option for your financial means.
What are the costs and benefits of renting out an old property?
When making the decision, your budget should account for all income and expenses associated with renting out your home. You will need to compare this with the costs associated to renting or buying your ‘new’ home.
If you decide to keep your old home when moving properties it is most likely that you will need take out a much larger mortgage on your new home. As a result, your mortgage repayments will be higher than if you sold your old house. You must carefully consider if this is a financial risk you are willing or able to afford.
Renting out your property is essentially turning it into a business. You will have to take on the responsibilities as a landlord to ensure the home complies with the law and be prepared for ongoing maintenance costs as it is your responsibility to maintain the property for any tenant.
It is wise to appoint a managing agent like Leasing Elite who specialise in looking after the landlords needs and safeguarding their legal requirements. We also maintain a good relationship with your tenant ensuring that their needs are met and that they are happy tenants.
By keeping your old home, you now have the option to turn it into an investment property. You should consider the value of your land, property and its location when deciding. If you are a frequent traveller or work overseas, you might want to return to your home rather than selling it when you leave.
Rental income can be a valuable contribution to mortgage repayments. If your investment property increases in value, you have the benefit of increased rent over time and therefore overall cash flow. Of course the other significant benefit to keeping your old home as an investment property is the flexibility to maintain it as a first home for your children if and when the time comes.
Alternatively, if you love your original home, but need something bigger for the meantime, keeping your investment property means you will always have a home to return to when it’s time to downsize.
If you have any enquiries about the property market, feel free to get in touch with us and speak to a member of the Leasing Elite team.