• Michele Wood


Updated: Sep 25, 2021

This is a question that I often get from clients who have 20 percent to put down on another home. So what is the right answer? It all depends on what is happening in the market and what stage of life my clients are at. If it is a sellers market, most sellers will choose buyers who are putting more than 20 percent down. That means if my clients are a little strapped for cash and cannot put over 20 percent down, then it is not a good time for them to keep their existing property and rent it out. If they have a good amount of cash and need to invest it for an excellent return, then it would be wise for them to hold on to their existing property and rent it out. With interest rates so low, there will not be a better investment. So as long as the rental market will cover their existing mortgage, this is a great option.

The second question I ask my clients is "what stage in life are you at." In other words, are you young or are you close to retirement age? If you are close to retirement age, do you have enough money to retire in the next couple of years? Is your house close to being paid off or do you owe alot of money on it? If my clients are young, then it makes good sense for them to rent out their existing home. This way, by the time they are of retirement age, the property will likely be a large nest egg. If my clients are close to retiring and they dont have alot of money saved, then it may be better for them to sell and receive the high yields from a sellers market. When the market does turn in the short run, they might not be able to get that top dollar for their property. The only time it would make sense for a person to rent out a second property close to retirement age is if the house is close to being paid off and they will be receiving most of the rental income every month. In this case, rental income would supplement the retirement income they will be living off of. In no way do I want to give my clients financial advice without them consulting their tax person or financial planner but the above questions and market information can give a client alot to think about.

Michele Wood

CalBre #0192134

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