Should I Lease My Property or Should I Sell My Property?
Seattle has such a dynamic housing market and our housing prices have been rising since the dot.com boom. We aren't slowing down! Purchasing property and leasing it out is a fantastic way of holding onto your investment and seeing cash returns while that asset appreciates!
You probably paid an appraiser, a loan fee, title insurance, escrow charges, a notary, and recording fees. When you sell a property in King County you also pay Excise Tax of 1.78% of the purchase price. Add in a standard 5%-6% brokerage commission and you could be looking at 10% of your house’s value going to other people on a sale. If you have a standard loan, these charges could be well in excess of 25% of your equity.
For many Seattle homeowners, the family home is the family’s largest financial investment.
Unfortunately for frequent movers, real estate is also one of the most illiquid asset types.
Every house or apartment is both a real asset, in that it is a tangible piece of property that you can occupy, enjoy and use, and also a financial asset in that you can lease it, mortgage it, or sell it.
The expenses are close to the same no matter what your use.
Your real estate tax does not go down just because your house is empty, those payments are due twice a year, like always. At the same time, when you make money from your house, except for revenue-related fees (short-term rental tax and house cleaning fees, city registrations, higher insurance premiums, etc…) the fixed expenses don’t change, your real estate tax and your financing costs don’t go up, allowing you to make great profits on rental income.
"But I"ll make so much money, why don't I sell it?"
Sure, you have watched your property’s value go up the whole time you have been living there, but the best long-term investments go up for a long time, and the advantage of real estate is that it offers many different ways to monetize your investment.
Before you move out of your home, explore a refinancing at low owner-occupied rates. Locking in a low monthly payment for several years will allow more of the tenants’ rent payments to hit your pocket. You may also find that lower rates allow you to put some of that price appreciation in your pocket right now, tax-free, and continue to own the property, collecting cash flow and future appreciation.