By Neil Fjellestad & Chris De Marco
We get asked this a lot. The answer you settle on can literally make the difference between whether or not you have the kind of retirement you want for yourself including something to pass along to your next generation.
Question – “I have roughly 200K as equity in my current home in north San Diego. We are going to close escrow on a new home in a week’s time in the same area. I don’t need to sell my current home to buy the new home. Since I’m not sure about being a landlord and sales prices have gone up should we consider selling our home instead of renting it?”
Answer – You should definitely hold your current home as a rental if you do not need to sell. It might surprise you to find that many local independent rental owners got their start the same way. Of course this is a long-term proposition and you need to surround yourself with professionals that will provide consistent property management and constant real estate investment advice. Someone should talk you through your investment objectives and financial resources. This can prepare you with a long-term strategy for your real estate decisions. The first property management priority is to choose professionals to establish a competitive rent rate, get your vacancy filled with a qualified renter that wants to be treated like the preferred customer they are.
You should also know that if your estimated 200k equity does not represent at least 30% of current value then you need to start paying down existing loan balances though refinance or savings. You are going to be in the rental business for a long time and need to stay safely capitalized. Forget those books and infomercials that preach you can buy with no money and flip for scads of cash. Did we mention you’ll be rich and retired by the end of the year? Remember, if it sounds too good to be true, it is. There’s a reason these exaggerations about real estate get started. It has history as the foundation of smart wealth and San Diego rental property captures the most advantages of this wealth strategy. There are correct methods that cannot be ignored.
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