Should I sell my current Bay Area home or keep it as a rental?

by Alessandra Imanabadi

A home can have served your family well without being the best place to keep your investment money. Compare the decision you would make today with the property you already own.

Start with what your home is worth compared with the rent it can earn. A more expensive home does not necessarily make a better rental. For illustration, suppose a $1 million home rents for $4,000 a month. A $2 million home will not automatically rent for $8,000. Buyers may pay substantially more for features that tenants will not pay proportionally more to rent. Then come vacancy, repairs, property taxes, insurance, management, and any mortgage payments. What looks like attractive rental income can leave much less in your pocket.

Ask whether this is the best property for the investment you want to make

You bought this home to live in. That does not automatically make it the property you would choose to own for income. If you want to remain a landlord, compare keeping it with selling and purchasing a duplex or another property selected specifically for rental income. Multiple units may produce stronger income relative to the purchase price—but compare actual properties, expenses, financing, and selling costs before deciding. Here is a simple first comparison: multiply the monthly rent by 144 months—12 years. At $4,000 a month, that equals $576,000 in gross rent, assuming unchanged rent and no vacancy. Compare that with the property’s value. Then compare the same calculation for alternative investments. If a property’s 12-year gross rent equals its purchase price, that is a useful screening number. It does not mean the property pays for itself in 12 years: expenses and financing still come out of that income. Before deciding, ask your tax adviser how renting it out affects the tax exclusion you may have on a sale of your home; renting too long can reduce it. Keep your home because the investment fits your goals—not simply because you already own it. A good agent should help you compare what your equity could accomplish in this property, your next home, or a different rental.

Speak with Alessandra about your situation. We will help you identify what matters, what deserves a closer look and the next step that fits your plans.

Should I sell my current Bay Area home or keep it as a rental?

by Alessandra Imanabadi

Ask whether this is the best property for the investment you want to make

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