I have outgrown my present home. I am financially able to purchase a larger home and make the move. I would like a larger and newer home with many different features we could enjoy for years to come. Our children need a bigger yard and an extra bedroom would be great. My current home is paid for and does not have a mortgage.
The BIG QUESTION is, do I sell my home or keep it for an investment property? I live in a great neighborhood, where the homes continue to appreciate in value.
However, I have never owned a rental property, do not know the costs associated with one and what rental rate I should charge. A Property Management Company can help answer these questions.
This will then bring up the other question, “Do I self-manage or hire a management company who will show the property, prepare the legal documents, collect the deposit and rent, check out the potential tenants, arrange for maintenance and proceed to evict a tenant if necessary? The charge for all this is a percentage of the money collected, usually about 10%.
Another question to consider is will the rent I receive cover all these expenses and provide a reasonable return on my investment? The other calculation involves the increased monthly cost of my new home mortgage if I keep my home, as opposed to selling and placing the equity I receive to reduce the new home mortgage.
The final question is what are the tax consequences. If I keep the home, I will have additional tax write-offs plus a depreciation write-off. If and when I decide to sell, I can use the IRS 1031 Exchange Rule to defer up to $250,000 ($500,000 if married filing jointly) of gain without any tax if I purchase another property of equal or greater value.
Before making this decision always consult your real estate, tax and legal professionals to give you expert advice.
On the Local Scene
BAYOU BAR AND GRILL is the new construction on Bayou DeSiard in the 5300 Block of DeSiard Street, Monroe (close to the Waterfront Grill). It is scheduled to open in the Summer of 2020.
LOGAN’S ROADHOUSE 201 Constitution Dr., West Monroe has been sold for $2,677,500. The 7,928 sf restaurant sold for $377 psf. It is expected the restaurant will continue to operate as Logan’s Roadhouse.
Bill Roark is a Commercial Associate Broker at Tri State Properties and may be contacted by email to firstname.lastname@example.org.