[Music] Hello everyone and Welcome once again to an episode of Selling Greenville your favorite real estate podcast all about the Greenville real estate market hosted by Yours Truly Stan McCune realtor here in Greenville South Carolina not just Greenville I go to Spartanburg I go to Anderson I go to Pickins I go to okone all those places I am all over the upstate you can find me just about anywhere within you know about an hour of downtown Greenville that's my radius and you can as always contact me with my contact information that is in the show notes my cell phone is in there my email is in there reach out to me with any questions or ideas or feedback about the show that you have and and speaking of feedback about the show go ahead and give us a rating or a review I love to see that in the show really just takes you like 10 seconds but it makes a big difference to me it makes a big difference to the show and make sure that you're subscribed to it as well just in case you haven't been subscribed to it you might miss episodes so make sure that you're subscribed that you're not missing any future episodes now a question that I get from a lot of my clients because a lot of my clients have have heard me and have listened to me talk about my rental properties right cuz I have you know right now 13 rental properties and there it's a variety of properties ranging from short-term single family to multif family to Section 8 a whole lot of different types of rental properties and I get a lot of questions from my clients that are looking to move should I sell or should I keep my house and rent it out and so I want to discuss that because this is something that keeps coming up I think that more and more people are thinking about keeping their their you know the first home that they purchased which now you know they may own outright or they may just have a really low mortgage payment on it and only you know maybe 10 15 years left to pay it off whatever the case may be and they're starting to think well maybe I should just hold on to this right the area it the Greenville area the Greenville Market is doing well it's a good place to rent in you know what should I do should I keep it should I sell it that's what we're going to talk about today now each situation is a little bit different and I need to to start with that and and that's going to drive the way I address this question because it's not a cut and dry answer to whether you should keep or sell a property I'm going to answer that question with five questions okay and you can then take those five questions and use them as the Paradigm for you to determine what's best for your situation and of course I always talk it through with my clients when they are wanting to discuss should they rent or sell I will talk it through with them and of course you know just my style for those of you that know me I'm a pretty straight shooter I'm not going to try to convince someone to sell a house if it's not in their best interest even if that is to my detriment it is not myo to try to convince someone to sell a house if it is not in their best interest so so I will shoot you straight on any questions about that but here is what I think that you need to be considering if you are thinking through whether you should keep your house and rent it or whether you should just go ahead and sell it and then buy the next house and by the way I'm assuming that that you can get pre-approved for the same type of house that you want to move in regardless okay that's a big factor a lot of people have to sell their house in order to buy the next house and so that's something that you need to obviously think through if you're looking for a house that you can get pre-approved for regardless of whether you sell your current residence or not then these questions come to mind if you need to sell your house in order to get in order to make the move that you're looking to move then obviously that's the answer to your question don't just hold on to your house for the sake of holding on to it but then limit what you're trying to do with your lifestyle sometimes we can overthink things and end up hindering our lifestyle in an effort to make it better so just keep that little part in mind I'm going to assume that whatever move you're looking to make that you can make that move regardless of whether you sell your house or simply keep it and turn it into a rental now here are the five questions that I think you need to ask yourself starting with question number one are you contemplating a long-term rental keeping this as a long-term rental or keeping this as a short-term rental now this is a really important question because they each have St strs and weaknesses to them long-term rentals by longterm I mean a year or more by shortterm I mean you know anywhere from one one day you know for instance on like Airbnb or or vbo where you can do one day rentals anything from one day to you know like six months they each have pros and cons obviously if you're doing shortterm you have a lot more overhead if you're going the Airbnb B route if you're going the 3mon 1 month 6mon route there are expectations that your house will be fully furnished and that then it becomes in that situation really important what your Decor is and what your your ability to decorate and to make your house look good those things become very very important your overhead is going to be more if you're hiring a property manager you're going to be looking at 15 to 25% of the money that that brings in is what that property manager is going to ask for as their commission and on the flip side if you're looking to do a long-term rental that will be a lot less you know at the most 10% but there are some good options out there that do flat fee type of property management as well that could be you know significantly cheaper for higher-end rentals the short-term Market has well both of them have different wear and tear on the house right if it's shortterm you've got a lot more foot traffic coming through they're going to do a lot of wear and tear to your furniture to your Decor to all of these things if it's a long-term rental they're going to do more wear and tear to the house itself they're going to cause more house damage in one way or another and so there's a lot of different considerations there you're I I started to say I I didn't complete the thought but your overhead on a short short-term rental also is is increased by the fact that you are the one paying for the utilities paying for the electricity paying for the water paying for all of these different things let me tell you on my Airbnb we get some some pretty high bills on water and electricity on several of the months that we've had that and you know it's because people don't care they'll leave the AC on you know 55 IR irrationally they they do not even care there's only so much that you can do in order to prevent that and and so you know that's where it's important to really run your numbers and really understand what you're looking at you need to ask yourself question number two is this the best property to to rent okay and this is really the question that I will pose most often to my clients because I understand the rental market really well in this area and a lot of times the home that you live in is not going to be the most efficient home to rent from a money standpoint and you might say well I don't owe anything on the home or I know this home really well or you know it it doesn't it doesn't need need anything to be done to it etc etc those are all fine and good but that at the end of the day let's let's take that first one for instance I don't owe anything on this home that's awesome by the way congrats you could sell that home and and use the cash from that to buy another home that you still don't owe anything on that might be bringing in a lot more per month than what your current home is doing now for long-term rentals it's very very simple in our Market multifam does better than single family all the time now the only caveat here is that multif family does tend to be quote unquote more on the lower end in terms of rental income that said your house as a single family house might end up being even if you think it's a high-end rental just by virtue of the location just by virtue of what it would be competing against it may end up as a quote unquote lowend rental really unless you're in a prime location and by Prime I don't mean you know like I'm in Riverside School District you know in Greer I would not consider that to be a prime location I'm talking about near downtown Greenville that's a prime location near Downtown Greenville on a wonderful street with three four $500,000 properties okay let's paint that picture of what a prime location is unless you are on unless you are in a prime location like that your property is is going to get tenants that are going to be probably a little bit more on what we would consider I shouldn't say the tenants are going to be on the low end but the price point that you would be renting that property for is going to be a little bit more on the low end we don't really have that the upper end the high-end Market in Greenville there's just not a huge market for that because of the fact that it's so cheap to buy so why wouldn't you buy why would you pay $2500 to rent a property that you could buy with a $1,500 a month mortgage it doesn't make sense the numbers don't make sense so most of the tenants out there are people that can't afford a mortgage and I'll just be honest with you guys a lot of people don't realize that they don't realize that the person that is going to be renting out their house is someone that doesn't have enough money to afford a mortgage and they might not be comfortable with renting out their house to someone that might be a lower income earner now I'm not encouraging you to look at it that way but I'm just saying a lot of people that I talk to feel that way is your property the best property to rent you need to think that through are there more efficient rentals that are out there there are some properties even right now that are on the market that you know they might need a little bit of work most good rental properties on the market do but they might need a little bit of work but they could rent you know you could you could put 1301 140,000 total into the purchase and rehab and get a property that's bringing in 22200 or whatever a month because it's multifam you've got more doors and that means that you're the amount of rent that you're bringing in exponentially goes up but there's a lot of headache with rentals you need to consider that question number three do you understand all of the financial ramifications of renting okay A a lot of people particularly if if this would be your first rental property there's a lot to consider with regard to this and I'm not going to go through every Financial aspect but you need to consider a lot of a lot of different things when it comes to this and of course caveat I'm not a financial planner and I'm not trying to financial plan for you I have to say that but there are some money considerations your insurance insurance it's going to go up right your homeowner's insurance it's not the same if you're an owner occupant versus when you're renting and it goes up even more if you're doing short-term rentals if you're doing Airbnb you can expect your insurance to be higher than if you're doing annual rentals so all of that you need to understand your overhead is about to go up additionally your property taxes get ready because they're about to Triple because that's what happens pretty much anywhere in Greenville or Spartanburg County is once you go from being an owner occupant to renting out your property taxes triple if you're paying $11,000 a year right now you're about to pay 3,000 now thankfully property taxes in the upstate are still relatively low compared to I mean I know owner occupants in New Jersey New York that are paying $5,000 a year you know I can't imagine what they might be paying if they were renting out but down here the landlords get the brunt of it we get the Raw Deal and that's fine because landlords by and large are doing very well they should pay their fair share but you need to be prepared that your property taxes are going to Triple don't look at it from the standpoint of oh well I can just take you know I'm my current mortgage is you know $1,000 a month well that's going to stay $1,000 a month and I just need to factor in my rent no no no no no if your taxes and your insurance are escrowed into your mortgage your mortgage payment is going to go go up and you need to keep that in mind and there might may be some things that you really need to be the one paying that the the tenants aren't necessarily going to pay for maybe there's a unique situation where you might have to do some of the yard work or maintenance or whatever the case may be you need to keep that in mind and and a lot of people don't even consider maintenance as part of their budget when they're thinking about renting listen maintenance is a massive part of it and in my experience in the upstate the security deposit never covers what tenants do and and what it costs to rehab a property after a tenant moves out and so you need to to keep that in mind the security deposit that you collect it's probably going to be like half of your first month's rent that at the end of the day when they move out you're going to have to do a lot more work than that security deposit covers and that's an addition to all of the maintenance that you've had to do you know all the different things that have come up in the meantime and so you need to understand that there are a lot more financial things than than would necessarily at first glance meet the eye and the last thing and again because I'm I can't label myself as an expert with this you've got to remember that there becomes a very big transaction that happens when when you sell that property you might now be having to pay capital gains tax whereas if you sell a property as an owner occupant you don't have to pay Capital Gains but if you sell an investment property now it depends on a lot of different stuff if you were previously an owner occupant and then it becomes your investment property and then you decide to sell there are different considerations there in some instances you might not have to pay Capital Gains if you sell it relatively quick quickly after you were an owner occupant but you need to talk to a 1031 intermediary which I can connect you with if necessary but that but those are the people that you need to talk to about that or maybe your accountant regardless the vast majority of people probably 99% and that's not an exaggeration probably 99% of investment properties that are sold in Greenville County they have to pay capital gains or then turn around to to defer their capital gains purchase another property immediately after that that would be an investment property and so you need to keep that in mind as well you sell it as an owner occupant no capital gains that you have to pay you sell it as a landlord now you either do have to pay capital gains or you need to to sell it and then immediately purchase another property and by immediately I mean within a few months there are some rules that allow for what we call a 1031 exchange it can happen within a certain time period but you you will have to buy it within a few months the next property in order to defer your capital gains not say deferment which means that if you then sell that property that you bought after the last one that you sold and you don't buy another one you'll still have to pay capital gains on going back to the original property so keep all of that in mind a lot of people don't think through all of those different scenarios when it comes to renting a property there's a lot that goes into that and there there are a lot of money considerations another question that I asked clients that are that are considering renting versus selling is is there sentimental value here do you have sentimental value with your home that you're having a hard time selling it you don't want to sell it because because there's there's more than just money value here there is sentimental value and I asked that question for two reasons because some people might make a decision that's not based on money that's based on sentiment and I fully respect that maybe you're willing to take a loss and and not make money in order to hold on to a property because in your mind you just want to keep that house that has that's where you raise your kids you have so much emotional equity in invested there and you don't want to give that property up I fully understand that I fully respect that there I have no argument for that outside of obviously make sure that your kids are living okay now make sure that the decision that you're making financially Now by keeping that property isn't negatively impacting your kids now because that's more in my opinion more valuable than whatever you know sentiment you might have in the house but that's something that outside of that I'm like I fully respect that some people might not be able to give up a property that they had tons of of memories in and that's totally fine but it can honestly that sentimental value can be played against you and can become extremely stressful and extremely problematic when it comes to renting out a property because guess what those renters don't have the sentimental value in the property that you have they're going to in your mind they're going to destroy that property they're going to put holes in the walls they're going to you know damage the plumbing they're going to damage the flooring you know have water spill on it and sit there and then mold growth and I mean I have seen and heard everything in my years of being a landlord and in my years of being a realtor and so remember that as well you might have that sentimental value that you don't want to give up that property but remember you're putting a complete stranger into that property there is going to be damage to that property that may cause more stress for you than you anticipated now if it's a situation where you're renting it out to a close friend or a member that's fine but again now remember now now you're you're basing things off of sentimental value you're probably giving a good deal to whoever the person is that's renting the property out then you're going to have to pay Capital Gains down the road when you sell it you need to to consider now if this is a wise financial decision there's a lot that's going into that and and I found in a lot of instances when people rent to friends and family often times there ends up being drama and it doesn't work out very well so just be careful with that as well obviously each case is different and unique my fifth question and my last question we're going to wrap this podcast up a little bit earlier than our last one is is your house in an area where there is tremendous home value growth happening or is it average or below average value growth or appreciation well just say appreciation is it average below average or really tremendous we talked about this in another podcast where I went through the different areas of Greenville County and discussed you know where is above average below average and just average appreciation happening based on tracking the median price points for different sub regions within the county and and even a little bit outside of Greenville County as well generally speaking again I've already said this but if it's not near downtown Greenville it is getting probably about average appreciation if that Downtown Greenville and the neighborhoods surrounding it those are the areas where that tremendous 10 15 20% year on-year appreciation is happening the rest of the areas are doing well if they're getting 6 to 7% appreciation and if you're out kind of more in the country you're probably getting a little bit less than that even out here in the Riverside part of Greer East Side Greenville even those areas at least up to this point have been only getting that appreciation around like 6 7% so I would not consider those to be tremendous growth areas so don't put too much banking into appreciation unless your home is in one of those near downtown Greenville you know Denine Judson go Parkins Mill Overbrook areas North Maine areas like that that have just been seeing tremendous growth in the past 10 years unless your home is in one of those areas I would not base the decision on appreciation if you're talking about 6 7% I mean a lot of people can beat that in the stock market so just keep that in mind again I'm not a financial adviser but there's a lot to consider when you're thinking about this and for most instances in the upstate appreciation is just kind of an added bonus you want the property to cash flow on its own and for the appreciation to be a bonus that you reap at the end and and something that that is just kind of accumulating as an an added bonus and something that you know that you don't get tax against appreciation so that's really nice or at least not on the front end you don't and so so that's what that's the approach that I take when it comes to appreciation and I mean if you're talking about down in like Anderson or you know some some of the Northern parts of Greenville County some of those areas are not doing very well when it comes to appreciation just because they're kind of out in in in the sticks and honestly it might be best to to just sell and to you know find a way to purchase a different property in a different area that would appreciate better so there's a lot of considerations when it comes to that more often than not when someone comes to me with the question should I sell or should I rent I encourage them to sell and again that's not because I'm trying to be self-serving that's just because for most people that's the best decision based on the property that they have now if they're living in a duplex or something like that probably I'm going to say yeah you should keep keep this property and rent it you're going to do really well continuing to rent this property over the years if they're in an area like you know for instance North Main I might be like well you know what if you're willing to Airbnb this property and this goes back to our first question if you're willing to do a short-term rental and you're willing to deal with possibly the Greenville Greenville city because as in inside of Greenville city limits you're you're willing to take the risk of Greenville city cracking down on short-term rentals at some point which very possible they will given how much of of their revenue comes from hotels if you're willing to deal with all that headache and and you know there's not covenants and restrictions or whatever restricting short-term rentals then yeah that might be a route to go that could could be a very profitable route again it depends it's a case by casee thing but more often than not you know people if they didn't originally buy their house with the idea of renting it down the road more often than not that house is not the most efficient rental and you need to consider these other things maybe you do want to hold on to it for sentimental value but is that the best reason there's a lot to consider and I love talking about this again I do my best to be unbiased to just approach it as I'm trying to help my clients and help them think through the scenarios what's going to be best for them and if you have a specific property that you want to discuss with me I would be more than happy to do that we can look at the data look at the number see what it will rent for see what your overhead would be we can crunch all of that usually I have to see the property in order to be able to make that determination but I'm happy to do that let me come by I can look at the property give you an idea IDE what it would sell for give you an idea what it would rent for and we can have that conversation and feel free to reach out to me with all of my contact information in the show notes let me know what you're thinking let me know what you need and stay safe until we do this again next time [Music]