Should I Rent or Sell?
This is a question that I often get asked, especially given the transient nature of work in many sectors, particularly the mining sector. Often families who have only just settled into the community and their newly purchased homes, find themselves digging out the packing boxes once again.
Whether it’s due to job promotions or transfers, redundancy, new work opportunities or personal reasons taking them off to new horizons, it poses the difficult question of should we rent our home or sell it now?
In my experience, the answer to this question depends upon your individual situation.
Scenario 1: We want to buy in our new location. Do we need to sell our current home to achieve this?
This question is an interesting one in the wake of the Royal Commission. Obtaining finance is as difficult now as I have seen it over the last 15 years. If you are keeping your current house as an investment, banks will now only lend up to 80% of the value of your investment property. For example, if your property is valued at $350,000 and your mortgage is $250,000, then there is only $30,000 of available equity for you to use as a deposit on your next home (80% of $350,000 = $280,000).
So the current financial climate sometimes makes the decision for you when the answer is yes we want to buy in our new destination, so we will have to sell our current home.
Scenario 2: We are going to rent/stay with family in the new location, so if we rent our current home, is it going to go up in value over the next couple of years?
Predicting future market trends can be fraught with danger; however history is usually the best predictor of the future. Over the last decade, the Gunnedah housing market has recorded 9 consecutive years of growth. In 2008, the median house price in Gunnedah was $215,000. By 2018, the median house price had grown to $335,000. This is an impressive 55% of capital appreciation over the last 10 years.
With a mining sector still in full swing, new industries opening up and interest rates remaining at affordable levels, there is good reason to expect the next 10 years to follow this pattern of steady growth. The rental market continues to perform strongly, making Gunnedah a very attractive option for investors seeking solid returns and long term capital growth.
Scenario 3: We don’t need to sell now, so should we rent for 6 months and then sell?
In general, properties are usually easier to sell when they are owner occupied rather then sold with tenants in place. A tenant’s lease on a property is legally binding; meaning tenants are entitled to continue occupying a property until the end of their lease, regardless of changes in ownership. This can be a disincentive for buyers who wish to get immediate access to the property after the sale if the lease still has several months left to run. Agents can also only ask for access to a rental property twice per week, potentially restricting the opportunity for multiple buyer inspections throughout the sales campaign.
Owners also have a vested interest in ensuring the property is presented in its best possible light which can further enhance the prospects of a great sale price.
So our usual recommendation under this scenario, is to list the property now while you are still occupying it and keep renting as a Plan B should a great sale result not eventuate.
Selling your family home is always a big decision, and every situation is different. At Hennessy Real Estate, we appreciate and respect the privilege of sitting down with our clients and helping work through the pros and cons of that ultimate real estate question, should we rent or should we sell.
We look forward to talking with you soon.
Yours in Real Estate,