San Francisco Homeowners: Should You Rent Out Your Home or Sell When You Move?
Moving is a big step, and for many San Francisco homeowners, figuring out what to do with their property is one of the most important parts. A growing number of homeowners are considering renting instead of selling, and recent data from Zillow shows that nearly two-thirds of sellers (66%) pondered renting before listing, with 28% seriously considering it. In 2021, fewer than half of sellers even considered this option, showing a noticeable shift in mindset.
So, is it better to sell your home and use the funds to support your next purchase, or keep it as a rental to build long-term wealth? Let’s explore a few key questions to help you make the right decision for your financial and lifestyle goals.
Is Your House a Good Fit for Renting?
First, think about whether your home would make a good rental. San Francisco’s rental market is competitive, but some neighborhoods are in higher demand for tenants than others. Consider the following factors:
- Proximity: If you’re moving far away, it could be challenging to handle the day-to-day demands of a rental property.
- Neighborhood Appeal: San Francisco has vibrant, desirable neighborhoods for renters, but not every area is equally attractive.
- Condition of the Home: Are there any costly repairs or updates needed to attract tenants? If so, it may be more practical to sell.
If you see potential issues in these areas, selling might be a more convenient option.
Are You Ready for the Realities of Being a Landlord?
Being a landlord is more than collecting rent each month. It can involve significant responsibility and unexpected challenges, including:
- Maintenance Calls: Tenants might need repairs at inconvenient hours, from broken pipes to electrical issues.
- Damage Repairs: You may have to handle costly repairs between tenants to ensure the property is move-in ready.
- Financial Strain: Missed payments, lease breaks, and damage beyond the security deposit’s coverage are potential sources of stress.
As noted by Redfin, landlords often need a reserve fund to cover surprise repairs and should be prepared for this commitment.
Do You Understand the Costs Involved?
If your goal is to generate passive income, remember that managing a rental property involves additional expenses. According to Bankrate, some key costs to anticipate include:
- Mortgage and Property Taxes: You’ll still pay these expenses even if the rent doesn’t cover them fully.
- Insurance: Landlord insurance costs about 25% more than regular home insurance, offering coverage specific to rental properties.
- Maintenance and Repairs: Plan to budget at least 1% of the home’s value annually, or more for older properties.
- Finding Tenants: From advertising to background checks, finding tenants comes with its own costs.
- Vacancies: When the home is unoccupied, you’ll have to cover the mortgage until a new tenant is found.
- Management and HOA Fees: Property management fees can add up, typically about 10% of the rent. HOA fees may apply as well, depending on the property type.
Bottom Line: Weighing Your Options
Ultimately, deciding whether to sell or rent your home is a personal choice that should consider your finances, lifestyle, and goals. Selling might provide you with the liquidity for your next home, while renting could offer a long-term investment opportunity. Consulting with professionals like a trusted real estate agent can help you feel informed and confident in whichever path you choose.
