Should I sell or rent it out?
by Keith Broekman
Article Description

Should I sell or should i rent it out?

As your real estate agent of choice I have often been asked “Should I sell or rent out my old property?”   I recently found this interesting article from Local Agent Finder that I thought would be interesting for you to read.

If you own a home, and you’re tossing up between selling and leasing, there are a few financial considerations to think about.
In most cases, the short-term ‘safer’ option is to sell your property. However, it’s important to know that rental income can go a very long way in paying off your mortgage as your rental income increases.
Scenario
Let’s say you’d like to buy a new property worth $600,000 and you already own a property worth $500,000 (with a mortgage of $100,000). This leaves you with a net worth of $400,000 (the value of your home minus your mortgage).
So, should I sell or rent out my property?
Here’s an example to help you make a decision on whether to sell or rent:
Option 1: Sell
Let’s say you have enough cash to pay for general buying fees such as stamp duty. If you decide to sell, you’ll have $400,000 to use as a deposit to buy your next property, meaning you’ll only need to borrow another $200,000 to buy the new property.
Advantage: it’s a safer option as you’ll only have one new mortgage of $200,000.
Option 2: Rent
If you decide to rent out your existing property, you’ll still have your existing mortgage of $100,000 and you’ll need to borrow another $600,000. This means your mortgage repayments will now be higher.
However, let’s say your rental return rate is 5% – you’ll be making a rental income of $25,000. This income will go a long way towards paying for these increased mortgage repayments. Your cash flow will improve as the rent increases.
Advantage: You’ll own two homes worth $1,100,000 combined, and you’ll have an higher net worth over time.
Disadvantage: You’ll have two mortgages worth a debt of $600,000 combined.
What’s next?

As you can see there’s no right or wrong answer, and there are benefits to both selling and renting. To help you with your decision, you can talk to me about current and future market conditions. 
Also, don’t forget to consider your personal life when you make this decision. If you’re going to be under stress with two mortgages, or you have additional financial considerations like school fees or other large loans to pay off, it’s a good idea to talk to your accountant before making a decision.

If you like to discuss your next property purchase in the Greater Springfield area then please give me a call and I will shout you a coffee!

Regards
Keith Broekman
0488 044 057
Note: Keith Broekman is a Licenced Real Estate Agent with a strong track record of helping the home owners in his community better understand the property market. To learn more about Keith please visit his website at www.kbroekman.com.au

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