Should I rent or sell my previous home?

What a fantastic position to be in, choosing whether to sell or lease your prior home. To be contemplating this scenario I assume you have secured another home, and have the financial capability and stress tolerance to cope with becoming a landlord. Or perhaps you aim to rope in professional help from a property manager.

There is no solid answer to your query. It is dependant upon your personal circumstances, which ultimately means sizing up the financial outcomes and implications.

The biggest drawcard when it comes to retaining real estate is the potential to build personal family wealth through cash flow and equity. There are some key factors that will help you to decide whether retaining the previous family home is the right choice.

Start by researching the rental potential of the property, not only in terms of the income but also the level of demand within your suburb. Is the area highly sought after by tenants? How are the comparable rentals performing? What is the possible income? How long is the home likely to take to lease?

It is important to consider whether the income produced from leasing the property will cover the expenses incurred. Determining whether the investment is likely to be positively or negatively geared will help you to understand the impact on your financial position. Guidance from a financial professional is recommended.

Determine the potential value of the property. This could be an appraisal, a formal valuation, or determined from your own homework.

It is important to consider the possible funds that the property could generate under current market conditions. If the anticipated sale price could generate a healthy profit, consider whether it would be better to invest elsewhere, of course, with the aim of a higher return on investment.

If you decide to hold on to the property and lease, it will mean taking a punt on the future price direction. It is also likely to alter your financial position by having an impact on your tax position. Your home is exempt from capital gains tax, until it becomes income producing – so best to seek advice from a tax adviser.

When leasing a previous family home there is a level of emotional connection to the property. It may have been your first taste of independence, where your first-born took their first steps, or you thought it was your forever home but, alas, it has now been outgrown. Are you able to disconnect the emotion? Whilst some tenants are a dream, some are the opposite. Let’s be honest, no one looks after your possessions better than you.

Ultimately, it depends upon how the figures stack up. The points discussed give you several spreadsheets and research to action.