Keep the Old House and the New?

by Bill and Aby Brooks, REALTORS® 12/23/2018

That starter house is too small and it’s time to move up to something that better fits your growing needs. The original plan—sell the current house and buy a new one—might not be the only option. What if you could keep both?

In many areas, housing is in lower supply. Some buyers are choosing to keep their original home, making it a rental, while buying a new one to live in. Is this a good plan for you? Here are some reasons why it might be (and some why it might not):

You don’t need the equity

Your current home has equity—the increase in value, plus the amount you’ve paid down on the existing mortgage—that you will receive if you sell it.The typical plan is to use that equity to make the down payment on the new home.If you don’t need that equity for your down payment, however, you could keep this home and rent it.

You don’t have equity

If you purchased your home during the last housing boom, or you got a second mortgage or refinanced and took cash out, your home may not have much equity. The cost to sell your home (real estate agent commissions, closing costs, etc.) might just eat up the equity you do have. In this case, keeping the home and renting it out might work out better for you than selling it.

You want to become a landlord

Turning a home into a rental is a business decision. Because it has its own costs, the decision to become a landlord should not be a casual decision. But, if part of your long-term plan includes real estate investment, start with the house you already own. The uptick in the economy and resultant business expansion in many areas means rental housing is at a premium, making this a prime time to own a rental.

The downside of being a landlord

Because it is a business decision, becoming a landlord is not for everyone.This is especially true if your family lived in the home and you have emotional attachments and memories built around it. The possibility of one or more months of no rental income must be factored as well, with a cushion to handle that contingency so that your mortgage is paid and the home you’re living in isn’t jeopardized. Additionally, setting aside funds for repairs from potential renter damage and general maintenance gives peace of mind to a new landlord.

If it makes business sense, but the idea of dealing directly with renters seems daunting or you don’t have the necessary emotional detachment,consider hiring a professional property manager. These real estate professionals know how to set appropriate rental amounts, execute lease agreements, handle repair and other costs, and screen potential renters.

Let a real estate professional know your plans. They can connect you with a property management professional to make becoming a landlord a smooth transition.

About the Author
Author

Bill and Aby Brooks, REALTORS®

Aby’s understanding of excellent customer service stems from her extensive professional background. Prior to earning her real estate license in 2005, along with her college degree that focuses on business and engineering, Aby was the head of purchasing, inventory and quality assurance for an OEM medical and aerospace manufacturing company. Known by her clients and fellow realtors for her tenacity, honesty, integrity, and attention to detail, as a full-time realtor, she is also appreciated for her quick response to her client’s needs. Aby has been an avid horse rider and owner since the age of eight, with her husband Billas a local firefighter/EMT they are very active within the community. Bill served as a US Army Airborne Ranger in 75th Ranger Regiment, he is a combat-wounded veteran who was awarded a Purple Heart. Bill's background as facility Manager for an International metals company and as a firefighter/EMT gives him the experience, attention to detail and the desire to go above and beyond to serve his customers. The Brooks' serve on the board of a local non-profit (501c3) that gives back to the veterans, first responders and their families. The Brooks family resides on their small ranch in Manatee County. Aby& Bill excel in all types of real estate and their passion is helping people. “We genuinely like people, growing up in Sarasota and Manatee counties and now raising our own family here, it is an absolute pleasure to share our growing area with newcomers and reminisce with longtime residents. Our area has so much to offer and it is our business to help folks buy and sell their own piece of paradise.”