Tampa real estate is undeniably hot right now. Zillow recently dedicated an article to “Why Tampa will be 2022’s Hottest Market” for homes, in a landscape defined by highly competitive cities. Saying of Tampa’s real estate market:
“...While all of the nation’s 50 largest markets are expected to grow healthily in 2022 and sellers nationwide should expect to remain in the driver’s seat, there can be only one Number One – and Zillow expects Tampa to top the list.”
That’s high praise from the leading real estate website in the United States. Homeowners are seeing higher property values for a number of reasons (higher construction costs on new builds, labor and material shortages, higher demand), and it’s got buyers in a frenzy. We’ve all heard the term “sellers market”, but is selling really always the best option? For today’s blog, we’re going to discuss the topic most homeowners have considered when they’re thinking about selling their property: should I sell my house or rent it out?
Selling vs. Renting: Factors to Consider
There’s a strong argument to be made for selling your home. Some reports have argued that we may be entering into the peak of its value, with homes being somewhat overvalued, giving some experts pause to consider what a drop in value would look like. Depending on your financial situation, you may have a strong incentive to sell your home.
Cash Flow Analysis
In our opinion, renting your home is likely your best move for long-term profits. We understand there are a lot of costs to consider when you are managing your properties independently. When doing a basic cash-flow analysis, you’ll want to work out the numbers on factors like:
- Mortgage Payment
- Property taxes
- Landlord Insurance
- HOA Fees
- Repairs and Replacement Costs
- Accounting Costs
- Vacancy Expense
Establishing these expenses will provide a baseline estimate of how much money you’ll need to cover your costs, or ‘break even’. Of course, the goal isn’t to simply break even — it’s to turn your Tampa property into a successful real estate investment that makes money! That’s why it’s important to get a firm grasp on all potential costs associated with owning a property and renting it out.
Managing your own rental property can be daunting, which is why we put so much emphasis on our property management services. For over 15 years, our clients have been able to draw residual incomes from smart real estate investments in Tampa, FL, and all around Tampa Bay with little effort by hiring us to do the landlord work for them. Faced with extremely attractive offers on their homes, many homeowners will be tempted to take the large “lump sum”, as it were. But, by doing so, they forfeit years of hassle-free income. The opportunity to make more through renting than selling is a slow burn, but in our opinion (and with the right property management team), it is often well worth the wait.
Long Term Investment
Selling your home outright means giving up a residual form of income. Property values may rise and fall with some degree of drama, but these assets in the Tampa region have consistently gained value over long periods of time. If you don’t absolutely have to, it’s hard for us to consider a situation where selling your property is the best long-term strategy. Real estate investing is a strong contender for easiest ways to receive a solid ROI, and our team can take care of the hardest parts for you.
If you owe more than the house is worth, it’s what’s called being “underwater” or “upside down”. Choosing to sell in this scenario will make it impossible to recover your losses, and is probably one of the last moves we’d recommend. From Tampa to Brandon, the current climate of rising home values indicates that if you are currently ‘underwater’, you may not be in that predicament for long. Adding value to your property is never a bad idea! We covered other ways to increase the value of your home in a previous blog that you can read here.
The temptation to sell your house for a large profit may mean at the end of the day you get stuck with a big tax bill. Depending on how much money you make per year and your household’s tax bracket, your capital gains tax could be as much as 20%. This doesn’t apply to all sales of homes, and there are some ways to work around the number with the IRS. For example, did you make less than $250k on the sale of your primary residence (in which you lived for at least 2 of the last 5 years)? These are topics to bring up with your accountant.
Hidden Costs: Stress and Time
Becoming a landlord is no small decision, and only taking into account the obvious financial costs and implications means you’re only looking at half the picture. Independent landlords can face a range of obstacles to the renting process: vetting renters is difficult on its own, and managing day-to-day problems, responding to every tenant request, and potentially butting heads with the same people who are paying rent can lead to highly stressful (and sometimes volatile) situations. Good faith and a solid work ethic can forge great working relationships between a landlord and their tenant, but there will always be an investment of time and effort.
By choosing Vintage Real Estate Services as your property manager, we can reduce the toll these hidden costs take on your quality of life. But we offer much more than that — for over 15 years, we’ve been helping people just like you realize their dreams of real estate investing, of setting up avenues for passive income.
If you’re not sure whether to sell or rent, give us the opportunity to show you why we believe renting out your home with a successful property manager is most likely the smart move for the current climate, and for your long term financial health.
To speak to one of our capable team members, give us a call at 813-684-0001.