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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
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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
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