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  • Writer's pictureCadiz & Lluis


And just like that, you have two (or more) properties on your hands. Maybe you’re buying a new family home and vacating your prior digs. Or maybe you’ve inherited a castle from the distant relative you’re actually named for. Who knew?

To quote The Clash, should I stay or should I go? Or more specifically, should you rent or sell that second home? First, go with your gut. If you’ve always wanted a tower and a moat, you may wish to make a newly acquired property your primary residence. However, the decision may not be so clear-cut.

Questions to ask yourself about any property you own:

How’s the roof? (Furnace, water heater, electrical panel, plumbing, yard?) These are big-ticket items. If a property needs big-ticket upgrades, it will be easier to rent it than to sell it in the short term.

Let’s talk taxes.

  • You’re responsible for property taxes for any residence that you own, whether you’re living in it or not.

  • Depending upon how long you’ve lived in a house that you own, you may be subject to capital gains taxes.

  • Specific tax rules apply to both renting and selling properties, so talk to your accountant before making your decision.

The case for selling:

  • Mileage, mental and otherwise. You currently live in another city, state or country and aren’t up for a major relo. Yes, you CAN rent out a condo in Brooklyn while you enjoy the aloha in Maui -- but like all LDRs, managing a remote property from afar can be a headache.

  • The “E” word: equity. If you have equity tied up in property A, you may need to sell it for the down payment on property B.

  • The market’s on fire. Well, duh. Especially on either coast, homes sell fast and at top dollar. How long before the bubble bursts (again)? Impossible to say, but consult a skilled agent to understand the best times to list your property. (Tip: current opinion is that March, not May is the time to pull the trigger-- and if you’re hoping to sell for more than the asking price, aim for the week of April 22. Definitely list before September when families with kids begin the school year. Also, listings on Wednesday in New York and Thursday in Los Angeles seem to move faster than weekend listings.)

  • Crunch the numbers. Will the rent you’ll realistically be able to charge cover both your current mortgage and property management costs? Unless the answer is a resounding “Yes!,” list that bad boy pronto!

  • Being a super…isn’t always so super. Do you REALLY want to know about anyone else’s overflowing toilet, or the discovery of termite frass under the sink? Not so much? One word: sell.

The case for renting:

  • You’re underwater, and we don’t mean in a private lagoon in the Bahamas. Turning your second home into a rental can buy you some time to gain equity.

  • You plan to come back. If you’re fleeing your current address for an Eat-Pray-Love excursion or top-secret assignment in an undisclosed location, you may ultimately want to park your boots right back where you started someday soon -- so rent the property with the understanding that you’ll be returning. Keep your eyes on the “breakeven horizon,’ the calculation which tells you the number of years you would have to live in a home for the accumulating costs of renting the same property to exceed the cost of buying it.

  • You’re an optimist about the market. Or maybe you’re just greedy. Sure, it’s hot now -- but who’s to say it won’t get hotter? If home values are appreciating in your area, you may be wise to rent the property and wait out the big payday. It’s a gamble, but remember that fate loves the fearless.

  • Scarcity of rentals. Let’s say that you now own a property which happens to be located in the epicenter of the next big thing-- whatever industry is blowing the lid off the world economy. Highly trained experts from around the world are winging in to accept positions in the area, and your property is a half-mile from HQ. Lucky you. Ask for the moon and count your money every month.

  • You love fixing stuff, and The Home Depot is your equivalent of Las Vegas. If you’re handy, and have the tools and the time, renting out a property can be lucrative, as long as you have a realistic grasp on maintenance costs and aren’t opposed to replacing an occasional fuse.

  • You’re stalling on capital gains taxes. Renting out a home that you own and have occupied can give you time to strategize the sale, delaying capital gains taxes that will come due when you sell.

It’s nice to have options. Begin by listing out all of the financials and hard, cold facts. But give yourself some grace. It’s undeniable that many qualities contribute to make a place truly feel like home, and where we ultimately choose to reside. Some of the most powerful reasons seem intangible.

For instance, you may really, really love the sunset view from your present-day balcony, even though the other property is bigger or newer. Or you may jump at the chance to relocate to a funkier, smaller, older second property because it’s perched on a tree-lined street in a walkable neighborhood where you can stroll out every morning with your dog for a local latte instead of driving to the nearest Starbucks. Of course, make sure that the basic financial equation makes sense. But beyond that, it’s as much a matter of heart and soul as dollars and cents.

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