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Selling Versus Renting Your Home in DC

June 26, 2014

Whether to sell your home or rent it out to tenants is a quandary facing anyone who has to move outside the Beltway or wants to upgrade to a new home. While a property manager can help you make a financial comparison for your particular situation, there are some ‘soft’ factors to consider about this decision and how it will fit into your lifestyle and financial future.

 

A Growing Market

 

Things in DC are looking up. While in many parts of the rest of the country housing prices are recovering from the recession, DC’s housing prices are getting a boost from both the country’s AND the city’s long term economic recovery. On top of this, they are bolstered by increasing urbanization and the strong local job market. All these factors point to continued growth. While there are no guarantees in investing, property owners are seeing tremendous upside in this market and most evidence points to the continuation of this trend. This upside is great whether you are selling or renting. However, whichever option you choose could determine how much upside you get to enjoy.

 

Timing

 

Timing is everything in the real estate industry. You may be eager to clean your hands of your house so that you can move on worry-free. But say it’s the beginning of December and you plunk your house on the market. Not only do buyers not favor house hunting in the winter, but the holidays will interfere with those hardy buyers that will! Renting your house out for 6-10 months so that it can land on the market in the hot spring or fall house hunting seasons can make a huge difference in your bottom line. Similarly, should you want to move but are fairly certain your house will sell for a higher price after a new development (planned for a year or two down the line) gets built, you can strategically rent your home so that you can sell when your home is most desirable.

 

Is Your Move Permanent?

 

Another factor to consider is whether your move will be permanent. Many jobs relocate people away from DC for a year or two, but your career’s best long-term prospects could still lie in the District. Selling your place and being done with it when you move may be the most convenient option, but you may find yourself regretting this move if you return and no longer can afford a home like you once owned due to rising property values.

 

Tax Benefits

 

If you rent your home rather than selling it, you can depreciate it for tax purposes. This, combined with the deductions you can make for other expenses, such as HOA fees, repairs, and property taxes, may tip the balance towards renting being a better choice financially.

 

Your Property’s Finishes and Location

 

There are many great houses in DC with aged, if charming, finishes. Renters can be very forgiving of a house that isn’t updated – they may even seek it out because, since they’ll only be in the house temporarily, they don’t care to pay a premium for a home with premium finishes. Buyers, on the other hand, see each non-updated room as an additional cost they will pay down the line. They will subtract these costs from what they are willing to pay for your home. Often, a house that is extremely desirable in the rental market is overlooked by buyers looking for granite countertops and stainless steel appliances. Updating a house for renters, by painting, cutting grass, etc. is much cheaper than updating a house with the amenities buyers expect.

 

Risks on Both Sides

 

Sometimes owners will view the sell vs. rent dichotomy as being a question of a sure thing vs. an uncertain thing. However, there are uncertainties on both sides. If you sell, you might get a great payout. However, you could find that if you had waited another year or two your equity could have doubled through appreciation. The day after you hand over the keys, Whole Foods could announce that it is opening in your neighborhood. Great – for the new owners! If you decide to rent, you are betting that in the long term, your property will continue to appreciate and rent levels will remain sufficient to pay your mortgage and turn a profit on your unit. Again, there are no guarantees here, but if you decide to rent, a property manager can help you plan to ensure that your unit remains profitable.

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