To Sell or Rent?

With a down market, homeowners are wondering whether they should sell their houses or rent them out and wait for the market to rebound. Stated in another way, is the investment value higher than the market value? Market value is the price a typical buyer will pay for your property. Investment value depends on an individual’s financial situation, risk preference, and the ability of the property to provide financial benefits over a pre-determined time horizon. For these reasons, investment value will differ for each individual investor. How one analyzes the stream of anticipated benefits depends on the quantity and quality of available market data.

Direct capitalization techniques such as gross income multipliers, capitalization rates, band of investment and residual techniques as well as yield capitalization are often used. Utilizing discounted cash flow analysis with sensitivity analysis as a risk measure can help give an in investor an indication of present value. This form of analysis makes explicit financing terms, changes in expense, income, vacancy, tax implications, and solvency issues.

Return can be partitioned into its individual components as a form of risk measurement (capital growth, tax benefits and liabilities, cash flow, amortization etc). For example, return solely from appreciation 10 years down the line may be more difficult to forecast than return generated form tax incentives and positive cash flow from operations. With partitioning, the analyst can determine which areas further research is warranted. At the bottom of this page is a program which can help analyze the investment value of a property. I have created a more sophisticated computer model. Contact me for a FREE analysis.

Any questions or for FREE customized Market Reports, automatic email updates on properties that fit your criteria, or Realtor Referrals, please EMAIL ME or call me at 734-478-9270. -Anwell Tsai