While there is a pragmatic, numbers only approach, the answer is usually emotional. The pragmatic approach looks at the investment opportunity of the potential net proceeds of the sale vs. the potential return from putting the home up for rent. These calculations will be discussed in future blogs.
The emotional decision is much harder. Here are the questions you should ask yourself:
- How do I feel about the prospect of having a rental property? Think of how you felt immediately after reading the question and you may have your answer. For many, they see owning a rental property as a liability. Many others get excited about a second income stream and see it as a step on the path to financial independence.
- Can I treat my rental as a business? Businesses typically require part of the income to be committed to investment. For example, many property owners fail to plan to paint at regular intervals (every 2-3 years, not every 4-6). The error many rental owners make it to take all of the money out of their rental business without having a plan to regularly maintain the rental unit that is generating that same money.
- Will I be able to mentally separate from my rental? From time to time I encounter property owners who can’t let things go. This results in them always being at the property (sometimes much more than the tenants would like), nagging tenants for rent instead of using a proven process, and can cause issues in their own homes and relationships. It’s critical for a property owner to be able to “park” all of the outstanding items in their rental for small periods of time so they can enjoy the other parts of their lives.
If you are excited about the prospect of a being a rental owner, look more closely at what it would take. We have several guides in our Boston Property Management Learning Center. And there are plenty of advisors and services to make the job easier; let me know about any questions you have.