The St. Louis real estate market is shifting, and what once was a major seller’s market is now quickly evening out for buyers. Sellers are seeing longer days on market and not as competitive of offers as before. This is leading more and more sellers to turn to renting out their home instead of selling it. Are you debating renting or selling your current home in the St. Louis area? Or maybe you’ve inherited a property and not sure what to do with it. Should you sell it, or maybe rent it out and find a property management company to lease and manage it for you? In today’s real estate market, it can be difficult to decide if you should cash out and sell now, or keep the investment property as a rental home. In this article, we are discussing why renting wins.
Equity
I’m going to bet you’ve got a substantial amount of equity in your home. The St. Charles and St. Louis real estate market has been crazy over the last few years, and with all of the property value increasing, more than likely you have a good amount of equity in your primary residence. And that’s probably why you’re highly considering selling, right?
But let me ask you this – what do you plan to do with that money you make? Do you have plans to invest it somewhere else? If so, great. But, if you have no plans for those proceeds, and are going to let it sit in the bank, why not keep the house as a rental and keep expanding on that equity? Imagine what that house will be worth in 10, 20 years! Way more than if it sits in the bank for that time. With current trends, probably way more than if it sits in the stock market for that time.
And guess what else – you can still get cash from the equity without selling your home. Do a HELOC, or do a home equity loan. Leverage your investment.
You Can Still Cash Out on the Equity
You can still cash out now on the equity you already have in the rental property. But, maybe you think that you need to sell your house to get a loan for a new one. This isn’t necessarily true. You can actually count the rental lease amount as monthly income. The typical rule of thumb is the lender will count around 75% of the rental income as income. So if your rental house leases for $2,000 a month, $1,500 of that is added to your calculated monthly income. Need down payment money? Do that HELOC or home equity line of credit I was just talking about.
Interest Rate
If you financed your primary residence, you probably have a pretty low interest rate. We all know interest rates have soared over the last few months, but I’m going to bet that you have a pretty good interest rate on your primary home. At least quite a bit lower than what you could get now, if you went out and purchased a rental investment property. Not to mention that with an investment property, you’re typically going to have a higher interest rate anyway, because you’re not occupying it. You’re in a great position right now! Take advantage of that low interest rate and keep it as a rental property. This will help strengthen your cash flow numbers.
Increased Rent Prices
And last, rent prices. Rent prices have increased dramatically. In St. Charles County, we’ve seen average rents go up over $200 in the last 12 months. On a national level, the average monthly rent has officially hit over $2,000. Usually, I don’t see a huge monthly cash flow for landlords who rent out their own houses – it’s more about the buy and hold, or equity building, but with the lower monthly payment you probably have, and the high rent prices we’re getting in the area, you have the golden opportunity of having both good cash flow and substantial equity building. Take advantage of that.
Rental houses are in demand, now more than ever. You might be thinking – Well, this sounds great, but who would want to rent out a 3 or even a 4 bedroom house? People rent apartments, not houses. Wrong. So many people rent out houses. Some people don’t want the responsibility of home ownership, people relocate to the area, there’s all sorts of reasons for people to rent. Most of our rentals are houses, and they rent on average in less than 2 weeks. Someone will rent your house, I promise.
Now is the perfect time to rent out your home. Give me a call if I can help. (636) 707-2000 or visit our website keyrenterstcharles.com