If you already own a home and are planning to move to a bigger space, you can either choose to rent out your existing place or sell it. It is relevant to understand the repercussions of both choices so that you can make an informed decision. This is an especially relevant question given that property prices are skyrocketing at this time. Let us examine how different scenarios will result in different results.
Generally, many investors prefer to keep investing in property and end up renting out each property they invest in. The idea behind it is to keep growing there property corpus. Given the vast number of people who opt for this option, it may be one of the good options to choose after all.
Buying a primary home and eventually renting it
The best property brokers in Vancouver recommend buying a primary residence and renting it. There are many reasons why this may be a smart move. At the outset, the most promising benefit of buying a primary property is the competitive mortgage rates, which means you get the best financing terms. Moreover, by staying in a primary residence, you get an opportunity to get acquainted with the surroundings, make decisions on schools, jobs, etc., However, if you choose to buy an additional property and instead rent it out, the picture changes. Not only will you be stuck with high mortgage rate, you will also be up for a larger down payment. Thus, from a mortgage perspective, renting your primary residence is prudent.
Having said that, it is not easy to wrap your mind around being a landlord. Managing finances, finding tenants and maintaining property is not for everyone. Though renting a primary residence is a solid move, the down payments may not be your cup of tea. Also, almost all non-first time buyers use money from their former property as a down payment for the next property. In absence of those, you may have to decide where to get your assets from, assuming you will not get 100% financing.
Buying a primary home and eventually selling it
There are many reasons why people decide to sell their primary home and move to a different home. Change in family composition, income bracket, career or merely wanting a change in area are some reasons out of many. Generally, people sell their primary homes and use that money as down payment for the next property. In the absence of sufficient funds, gifted funds can help you to get around. Another option is to look into a low-down payment mortgage if you plan to rent out a unit instead of parting with it, even if the financing is a bit expensive. In case you have a low fixed mortgage rate, something like a 3% or so, or if you can actually cash flow the property by taking in more than you would spend on HOA duties and housing payments.