By Living Room Realty, June 27, 2022
Recently a client gave me the good news that he’s moving in with his girlfriend. His home, purchased in 2014, was on the small side but so livable and on an oversized East Side lot. He wondered, should he sell the home or retain and rent it out? Let’s break down his options into pros and cons.
SELL
Market inventory remains historically tight and demand is likewise high. The broker sales pitch is not simply a pitch, it is in fact true: Now is an excellent time to sell in Portland, even with the higher interest rates.
Pros: He has equity to put toward his next home purchase and/or liquid assets to assist in the next life phase.
Cons: He will no longer be the owner of the cute home that he loves so much.
RETAIN / RENT
Retaining in order to rent is a great option, depending on his monthly cash flow and the cost of home upkeep. Before taking this route, it’s good to determine the profitability of the rental over time, estimate his potential monthly and yearly cash flow, as well as plan for unforeseen expenses. One resource for making this determination is using a Rental Property Calculator. See HERE
Let’s say, my client runs all the numbers and determines that his home will make an excellent rental property, retaining and renting the home will allow him to bring in passive monthly income while continuing to build equity on the home. Moreover, due to Multnomah County’s Residential Infill Project (RIP), retaining the home safeguards the option to build out his lot into up to 4 units. The potential pros of this option are many and the cons are too.
Pro: Retain equity in the home for continued asset appreciation and rent out for passive monthly income. Opportunity to build up to 4 rentable units.
Cons: The life of a landlord is very specific, especially in Multnomah County, which has complicated landlord/tenant laws.
Encourage to-do: Learn the ever-evolving Multnomah County landlord/tenant laws. My client should consider his capacity to tolerate the landlord/tenant interaction. Does he have the time, money, and emotional space should something go wrong? It’s also possible to hire a property management company.
