Life happens. Sometimes, people have to move for life or job changes. The decision to sell or rent a home in Denver depends on market conditions, owners’ financial goals, and lifestyle considerations. DenCO Property Management (DenCO) suggests that homeowners ask themselves the questions below when deciding to sell or rent their homes.
Does Your Home Make a Good Rental?
The first decision to sell or rent a home is whether or not a homeowner believes their home will make a good rental. A home tailor-made to meet a particular owner’s needs might not make a good rental. Fortunately, most homes are not that customized and can meet the needs of most renters.
Do You Want to Rent?
People become attached to their homes. They raised their children there, spent hours in their gardens, and remodeled the dwelling to their liking. If a homeowner decides to rent, they must detach themselves emotionally from the home and look at it as an investment. Psychologically, the house becomes a “property,” not a “home.” Then, they can do what it takes to make their one-time home into a rental.
Do You Have the Wherewithal To Be a Rental Property Investor?
Colorado sets rental standards, which are all defined in the State’s Warranty of Habitability. Tenants need a sound home that protects them from the elements, including a good roof, running water, heat, working appliances, sufficient lighting, clean common areas, and no rodent or insect issues. Annual repairs and maintenance cost money and the owner should have reserves to replace roofs, heating systems, the main sewer line, and other capital expenditures. The rent must cover all financial, insurance, and tax costs, with some money reserved to fix or replace items when needed.
When Do You Want to Sell?
Getting a home ready to rent takes time and money. A homeowner thinking they will sell in twelve months should sell it now to avoid repairing the property again after the tenant vacates. If they are not in a hurry to sell and have a low mortgage rate, they can manage the rental as a long-term investment.
Reasons to Rent Your Home
Low Mortgage Payment: A low mortgage rate increases a property’s ability to be cashflow positive. DenCO can provide owners with rental comps based on location to see if property can cash flow after expenses.
Denver’s Rental Market Is Not Like It Used To Be: The Denver market is strong for single-family homes in nice neighborhoods next to parks, good schools, restaurants, and shopping. However, the competition is stiff in these neighborhoods, so these rentals must show well, be in good repair, and be marketed professionally. Homes in less desirable neighborhoods and older one-bedroom condos sit vacant in Denver. Their owners should consider selling. Rentals with positive cash flows build equity are excellent long term investments that build equity.
Tax Benefits: Home rentals offer investors depreciation, mortgage interest deductions, and operating expense write-offs. Before investing, owners should consult their CPAs on how to optimize deductions and other tax benefits.
Flexibility to Move Back: If the decision to rent is temporary, the homeowner can move back into their home. Renting allows them to keep their property and cover their mortgage while maintaining flexibility.
Reasons to Sell Your Home
Equity Is Gold: Owners sitting on a lot of equity can sell and invest elsewhere. They should consider what return they could earn by reinvesting the proceeds into another asset or reducing debt.
Avoid Landlord Responsibilities: Being a landlord takes work, attention to detail, and good person-to-person skills. Colorado has strong tenant rights regulations, increasing the cost of doing business. Selling may be the better choice for some owners.
Final Considerations
Those deciding to sell or rent their home should do a break-even analysis to tell them whether rent covers their mortgage, taxes, insurance, and maintenance. If it has positive cash flow, renting might be a worthwhile long-term investment. Owners should consult their CPA to determine how to maximize these benefits.
Those who are making the sell or rent decision should give DenCO a call. We can go over the ins and outs of property management. Rental property investors who lack the time should consider having their assets professionally managed. DenCO has been in business since 1999 and manages over 175 homes, duplexes, and apartment rentals in the DU, Washington Park, and other Denver neighborhoods. Call us at 303-722-9688 or click here to complete a Contact Us form.
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