Rent or Sell?
6 ways to evaluate whether to rent or sell your property
If you’re considering between renting and selling, this means that you already have property at hand. The most common question going through people’s minds in this situation, is whether they should sell the property or rent it out.
Here are 6 ways to help you decide.
#1 – Evaluate current market conditions
Consider the current situation where your property is located, especially the demand for rental properties in your neighborhood. Do market research, determine the value and rental rate of existing properties in the area.
#2 – Analyze the value of your property in the future (or next 5 years)
You might have to do some research from the past 5 years to detect a trend, or get an assessment of your property to get a clearer picture. Even if your rental doesn’t cover all the expenses of maintaining your property, you might make up that loss if the neighborhood property values increase later. In that case, you can consider keeping the property (by renting it out), and wait a few more years while its value appreciates.
#3 – Determine your expenses for the property
Keeping property is a good way to prepare and fund for retirement. Calculate your expenses for the property i.e. mortgage payment, real estate taxes, insurance, assessment fees, maintenance fees (if any), etc. Once you’ve paid off your mortgage and retire, you can then consider selling it or continue to rent it and collect income.
#4 – Calculate your RPGT
How much is your real property gains tax (RPGT) if you sell it later? In Malaysia, the rate decreases significantly each year after the 3rd year, so you should consider selling the property at a later date to decrease the tax imposed on the sale of your property.
#5 – Weigh personal factors
Do you want tenants drilling holes in the wall and scratching the furniture?
Can you handle getting calls at odd hours about problems from your tenant?
Can you tolerate a tenant who keeps giving excuses for not paying rent, or does not pay rent on time?
Ask yourself these questions, and if the answer is ‘No!’, then you will have to seriously consider selling rather than renting. As a landlord, you will have to prepare for issues like these (and more), and pay for the maintenance of your house.
#6 – Determine the condition of your property
Renters are usually less fussy than buyers, as they know they are only using the property on a temporary basis. It doesn’t really matter if your furniture is rather out-of-date, as long as everything works and is safe to use.
Buyers, on the other hand, are more careful and specific about their requirements. You will most likely need to spare some expense to clean, paint, and repair fixtures in order to attract potential buyers.