When you finish remodeling a fixer-upper you don’t intend to live in, you usually have two choices. First, you can rent it out, creating a potential long-term source of income. Second, you can sell, giving you a bit of a windfall. Deciding between the two isn’t easy. If you aren’t sure where to begin, Realtor Paul Singh recommends some points to consider.
Assess the Potential of Renting and Selling Your Fixer Upper
One of the first things you should do is assess renting and selling from a financial perspective. The year-over-year housing price increase hit 19.5 percent in July 2021. Depending on when you bought the house, how much you put into it, and its current value, that could represent a very nice profit.
However, you don’t want to overlook the potential in your local rental market. On average, Fresno homes sell for $350K, a 19.7 percent increase in the last year.
Now, rent prices do vary depending on the home’s size and location. For example, a studio in Alabama costs an average of around $700 per month, while a four-bedroom in California runs about $2,520 per month.
Additionally, with a rental, you have to cover other costs long-term. You may need to spend the equivalent of 1 to 4 percent of the property’s value each year to keep it in good shape. Plus, you have to pay property taxes. While property taxes average at $2,471 per year, how much you’ll owe could vary significantly off of that, so you’ll want to look at that point carefully.
Still, the potential for significant earnings is certainly there. You’ll just want to estimate the rent amount you can charge and the operating costs, allowing you to see what sort of profit margin is left. It’s important, therefore, to work with a real estate professional who knows the local market to help you acquire the best possible deal.
Landlord vs. Property Manager vs. Selling: Your Responsibilities
When you rent out a property, you usually have two approaches you can use. One, you can operate as the landlord. With that, you get to keep more of what you earn from the property but also shoulder all of the responsibility.
Two, you can hire a property manager. That professional will manage the daily responsibilities of operating the property, reducing your burden significantly. However, that comes with a cost, lowering your profit margin.
Overseeing even one property as a landlord is complex. You have to screen tenants, collect rent, and handle maintenance requests. That alone can be cumbersome, but it only scratches the surface of what you may need to do.
Additionally, you need to familiarize yourself with local regulations. Before you dive into being a landlord, review landlord-tenant laws in your state. That way, you can get a grip on key factors, like security deposit restrictions, habitability requirements, and more.
With a property manager, at least some of those concerns fall on them. While you still want to ensure the property manager follows local regulations, a reputable one won’t require too much oversight.
You can also hire other help. For example, you could get a landscaper to take care of the lawn, an accountant to manage your financials, and more.
But if the idea of dealing with that much work isn’t enticing, selling may be your better choice. With that, you’ll get a tidy profit and no longer-term responsibilities. It essentially creates a clean break, allowing you to move forward with ease.
