Sell Home–or Rent it?

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sell your san diego home

It’s a persistent fear: Sell your San Diego home and then not being able to find or purchase the desired replacement.

This, while most sellers are unwilling to consider contingent offers when the buyer’s home is not in escrow. One solution is to rent out the existing home so that the transition can be made to the replacement.

The current San Diego housing market, while picking up in most areas, has one basic problem: low supply. With many buyers choosing to keep their old home when they purchase a new home, fewer homes are on the market, which further drives up demand. And rents are rising quickly–especially in coastal San Diego.

Should you become a landlord?

Sellers who don’t need the equity in their current property in order to purchase their next home, are choosing to become landlords instead. And you would think that because of this, the supply of good rental inventory would be rising.

That just isn’t so.

As Millennials find jobs and move out on their own, they are grabbing rental supplies. As aging Baby Boomers decide to move to San Diego for retirement, many are renting until they decide where they want to live. We live in a growing and dynamic economy. We currently have a very wealthy and young client with two school-age children who is renting until she finds THE perfect home near the private school her kids attend.

But I digress.

If you can afford and qualify to buy a replacement home without having to sell your San Diego home, you perhaps should consider doing so. If you get a good tenant, you might find one who is looking for a year or so to determine where they want to buy. After they move on, you then have the more comfortable option of selling into a strong market–or re-leasing the home for another term. You also are out from under the pressure you might have experienced if you were moving directly from Point A to Point B.

There are also some advantages to being a San Diego landlord–if you have the temperament for doing so. Since your former home is now a business for tax purposes, repairs, maintenance, utilities, taxes, insurance, some fees, and other costs may be tax deductible (but verify with your tax professional). This could also be an advantage for homeowners whose equity is still underwater or not where they would like it to be. They can rent out the home, use it as a business for tax purposes, and allow it to build equity.

But what if you need the equity from your current home to move to another?

If you have strong cash flow, large equity and your lender agrees, you might consider taking a home equity loan (HELOC) for the required down payment on the new home, put your home on the market, price it aggressively and market it strongly with your Realtor. If in good condition and staged nicely, it should sell quickly. This scenario will allow you to make an attractive and basically non-contingent offer, and will get you from existing house into your new home.

This is the solution we are suggesting for a current client who desperately wants to move from Poway to the Del Mar area, but fears being left on the street with their family if they sell their home and can’t find a replacement. The Catch 22 is that they might find their perfect coastal home, but will be unable to make an acceptable offer because they need the equity from their current home to make the desired purchase. We also have an excellent lender, WJ Bradley, who can facilitate the transaction.

But should you decide to rent, we suggest getting professional assistance and guidance to keep the leasing process on a professional plane.

The financial crisis and its ensuing recovery has increased the demand for San Diego rental housing. The cycle of buyers not selling their current home before buying a new one has reduced the supply of homes to buy, thereby raising the prices and pricing entry-level buyers out of the market. Unable to buy the home they can afford, they then seek to rent a home that better meets their needs needs, which results in rental price increases due to higher demand.

 

 

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