Rental Potential

If you've bought a home or are considering doing so, you've probably learned all the arguments for "Don't Rent – Buy!" After all, it's better to build equity by owning than to put that money into the landlord's pocket. However, if you're considering selling a secondary property, there are some arguments for "Don’t Sell – Rent!"

Some investors may be prematurely panicking in expectation of a weakening housing market, and thinking of selling secondary properties. One real estate research firm, Reis, predicts nearly a three percent rise in rent this year. This is partly due to reduced rental stock that resulted from strong homebuying in recent years. A gentle rise in mortgage rates has also contributed, because more tenants are staying put instead of applying for financing.

A stronger rental market suggests that investors could boost their long-term property values by renting now instead of selling. But how to do so successfully? The biggest area of competition is rent. Once an investor determines the costs associated with the mortgage, taxes, maintenance, utilities and the like, how much wiggle room is left?

Find out what competing landlords are charging, and consider incentives like discounts for timely rent payments. When weighing the pros and cons, remember that many real estate agents specialize in this kind of property, and can provide a valuable resource in making your investment decision.