Give me some grace because there’s a lot of letters here. I’m going to do my very best. Feel free to correct me, but this Ali IPA has a question. They say, if I’m moving to another state, should I sell my existing home or rent it? In other words, should I sell an asset?
I thought you guys might have some stories here and some good thoughts. Obviously, we don’t know your situation. We don’t know your circumstance. We can’t give you specific financial advice. Here’s what we can say: sometimes the answer is sell it, and sometimes the answer is to keep it. And we have counseled people through both. Right. It depends on where you are in your financial journey, depends on where you are in your financial circumstance. Are you someone who can navigate and handle holding property out of state? And you want to be a landlord, and is there something unique about that property that would substantiate you not selling it and continue to hold it because of some future potential that may exist there, capital appreciation-wise or are you moving to another state, and you just want to simplify? You don’t want to be a landlord. You don’t want to have to file multiple tax returns. You don’t have to worry about the water heater going out at 2 a.m. in the middle of the winter.
There’s a lot of questions you have to answer, and I feel like, Brian, this is one of those things that there’s a lot of animal analytics and mathematics and numbers and calculations that go into it. But this is also one of those where it’s not all science. There’s a lot of art. There’s some behavioral stuff that has to be thought about as well. Yeah, I don’t, it’s hard to give a direct answer, but I can definitely give you some guidance and experience shares. Because I can tell you, I work with a number of people, including, I’ve done a lot of rental property myself, but I’ve worked with a lot of real estate investors. Out of state rentals is not ideal because what is the biggest thing that happens with rental properties? You need to have some type of accountability. You want to make sure that whoever you’re renting this, this big illiquid asset to, is not just running amok, tearing it up, misusing it. As you can imagine, across state lines, that’s much harder. It also, I will, you know, this is a little-known thing. I’ll tell you because I owned property out of state. I’ll explain in a second. It also creates a little quirk in your estate plan because you know, we realize when you draft up wills in the state that you live in, if you have out-of-state property, there could be something from, but not only your estate plan but your insurance plan. There’s all kind of quirks that happen when you have out-of-state real estate. Out-of-state real estate, you know, I feel like I’m over here, you know, rapping out a little bit. But but it is, but here’s my experience. When I’m with my family, when we bought a house here in the Tennessee area in 2015-2016 time frame. I couldn’t sell my house in Atlanta. The market wasn’t it, which seems laughable in spite of what we just came through with all the inflation, supply chain, and everything, what happened to real estate and its big run-up. I couldn’t sell my house.
It was South Atlanta, and you guys South Atlanta struggled ever since the Great Recession. So I rented it out. That was all I could do, and look, I got lucky. I got a good tenant, a really good tenant. But it was still a headache in a lot of ways. The fact that if, like, I know my tenant, a great tenant but still, like, they had a trailer parked for a short period of time, the HOA started sending me notices. And then I’m like, “Crud, okay, I got to deal with this.” You know if you live down the street 20 minutes away, you just drive over there or you call them up and be like, “Hey, I hate to put you on this.” Because after I got the, you know, it’s one thing. I email them and call them, but then when I get the second and third notice from the HOA, I’m like, “Oh, how am I going to police this?” You know, it gets to be a hard thing out-of-state rent. Channel or what was a hard thing.
From my own personal experience, because of that whole accountability feature, um, that’s not now look, I will say if you get. I wouldn’t choose this, this is not the way because a lot of you might be in high cost-of-living areas, and you think, you know what, I see over here in this town, like, so let’s just choose South Atlanta because I have experienced that that was a low cost-of-living place. I’ll just go buy a bunch of houses because the price point is so much lower there. That is not a good business model for success. I would not make that my purpose just because you want to try to force an opportunity. Because remember, Warren Buffett talks about some of your best decisions are just decisions to say no. So don’t force it just because you watch some YouTube video, and they tell you, you got to create multiple streams of income, passive. But on the other side, and this is the wishy-washy part, if you get stuck like I did, it still was, without a doubt, the best decision at the time for me to rent it until the market improved. Because then I was able to sell the house in 2019, right before the great run-up, but still, I was able to get it off of my net worth statement, the liabilities and so forth.
Just make sure that you don’t try to force an opportunity or get yourself in a situation because real estate can go bad really quick. The only last thing I would throw into this is real estate is emotional. We love our houses way more than somebody else loves our houses, and we’re more attached to them, and it’s more viable, and if we have memories in there, it’s not a bad idea when you’re navigating these types of decisions to bring in someone with an outside unbiased view. And I don’t mean like your sister’s brother-in-law’s cousin’s buddy. I mean like bringing a professional, talk to someone who can actually help you think through this logically, remove some of the emotion because the answer may be to keep it and rent it, or the answer may be to sell it and not have to worry about it. So I would encourage you to think about potentially having someone come in and help you navigate that decision.
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