The decision of whether to make your primary residence a rental property or sell it and take that equity and move into something else is going to be an individual decision for each person. But I want to give you a few things to think about if that’s something you’re pondering. For one, I think that could be a great strategy if your desire is to build a rental portfolio over a long period of time. And I’ve even had some conversations with people about that. So what that looks like is you live in a house, you buy a house with a small down payment, you get the best interest and terms on the loan because it’s a primary residence loan. Then you move out of that house, move into another one and live in it for a couple of years, and the same thing there. You buy it with a small down payment, best interest rate and terms, but again, because it’s a primary residence. So you can get better financing on primary than you can in investment. For some people, that’s a good strategy and it’s the move-up strategy.
They move from one to the next to the next. So a few things for you to think about on whether or not that’s the right choice for you. I want to give you a few things to think about. According to this Fort Worth property management company the first thing you need to think about is, can you emotionally detach from that property? Now, if you’ve only lived in it two or three years, you probably can. But if you’ve lived in it and you’ve raised your kids there and it’s home and you know about every little nuance of the house and you just love it, when you move out of it and somebody else moves in it, they may not take care of every little nuance the exact same way you do. So if you have an emotional attachment or emotional commitment to that house, it may be difficult for you to see that the tenants damaged something or broke something which… And that’s all covered by a security deposit. We take care of that stuff. But if it’s going to affect you emotionally, it might not be a good move for you to take that primary house and turn it into an investment house.
Another thing to think about is, currently the way the law is, if you’ve lived in a house for at least two out of the last five years, any gain on that house is completely tax-free. So if you can sell it and make a big windfall, it might make sense for you to sell it, take the windfall tax-free and go invest that into something else. So, that’s just something to think about. It’s not right for everyone. Again, that may be a perfect rental house, and you may have a great payment on it. And it may work out perfectly. So that’s which brings me to my next point, what is your payment versus what can you rent it for?
So how much are you actually going to make each month? So factor that in how much you would make each month with how much you would make if you sell it. And then layer that on top of, what are your long term goals? Is it your goal to have a rental portfolio in the area that this house is in? If you’re moving out of state, you may not want to keep it. If you’re moving out of state, but planning to move back in three years, you might want to keep it. So again, there’s all these things that you need to consider. And if you’re considering it, something is on your mind and you want to just talk through it with someone, give us a call. We’d be glad to help you walk through these pros and cons and figure out whether or not it’s right for you to buy it or for you to sell it or for you to keep it as a rental property.