Kari McCoy commentary: Should I sell or rent out my California home?

Question: Dear Kari, My husband just received a job transfer to another state. We have the means to rent out our current home while buying a home in our new state. This has presented quite a quandary for us, as we never considered being in the rental business. We have friends that have made out quite well with their rental properties along with others that were not that fortunate. Could you please offer some advice on this topic? Answer: Fantastic question, thank you. I would first like to applaud both of you for not making a hasty decision. Renting out your home is a good option if there's a chance you'll want to come back to the state and live in your home again. Thinking through the pros and cons of renting vs. selling can be a daunting task for most folks. Owning a rental property has the expectation of a long-term income source along with continuing to build on the home's equity. However, taking the role of a landlord comes with heavy responsibilities. Let's look at some factors to consider: * Are current home prices on the upward swing? * Is the current real estate market in need of rental homes? * What is the going monthly rental rate for homes similar to yours? * Is your home in a positive condition for renters? * Is your home in a desirable location for renters? * Are you able to financially cover the mortgage if you are unable to rent it out? * Will you be able to pay for all the property's upkeep and maintenance? * Can you manage the property or are you going to pay a property management company and at what costs? * Along with the mortgage payment, do not forget property taxes, additional homeowners' insurance and other miscellaneous expenses. * Issues such as repairs, replacements, surprises, such as a new hot water heater, chimney repairs, appliances in need of replacement and all other ongoing maintenance needs to be considered. * After a tenant vacates the home, there are typically preparation costs for the next tenants, such as interior painting, carpet repair or replacement, along with any damage caused by tenant, etc., will all add to the expense of your bottom line. * Advertising and weeding through all the rental applications, rental history and background checks on tenants can add to the expenses incurred and be time-consuming. * Can you afford a mishap such as the tenants not paying the rent on time or if they do not pay the rent for two to three months or more? * It is vital to know all the tenant's rights along with the rental restrictions and owner disclosures required by California law. * There is a chance the tenants may cause severe damage to your home. * Being a landlord can be an emotionally draining ordeal, especially when tenant issues arise. * It is not uncommon with rental properties where landlords must evict the tenant through the court system, which can be extremely costly, as it will involve attorneys and several visits to court. Renting your home is just like many investment strategies that always come with risk factors. In the event your home value appreciates over time, along with rents continuing to rise, then you will have realized a fantastic return on your investment. Deciding to sell or rent out your home requires careful consideration, therefore it would be advisable to reach out to an accountant, financial advisor and a real estate agent to consider both your options to help guide your best decision moving forward. This is not tax or legal advice; it is an attempt to answer a question presented by a homeowner. Kari McCoy owns the Kari McCoy Group at Windermere Real Estate. She can be reached at 916-933-5274 or e-mail her at sold@karimccoygroup.com. #00841588