Should I Sell My House Or Rent My House
This is a question that I have been asked this year more than any other year during my time in real estate. My answer is always it depends on your personal situation.
If you are thinking about moving to a new home whether it’s in the same area or relocating all together you’ve probably thought … should I sell my house or rent my house?
As with many decisions, there are pros and cons to selling or renting your home. Deciding which option is best for you comes with considering several factors.Should I Sell My House Or Rent My House?
Selling My Home: Factors To Consider
Your Home Is Not Your Responsibility After The Sale
If you sell your home you walk away after the sale, no future responsibility to the property whatsoever. Plain and simple every single responsibility that comes with renting your home is avoided altogether if you sell.
Selling itself takes work and commitment, even with the best agent guiding you but, it’s temporary and once your home is sold you move on with your life.
If you are moving to another state selling is often the best choice. It’s stressful managing a rental property in general and when you factor in being in another state it only complicates matters. Owning two homes means double the responsibility.
As with most things in life not all tenants are created equal. They’re strangers living in your home and unfortunately, sometimes that means damage occurs. The extent of damage is an unknown. It could be nothing outside of normal wear and tear or it could be a destroyed house.
There’s stress that comes with owning a rental property and the unknown of what and when repairs and maintenance will be needed. If you sell then you will have no tenants or damage to worry about. You will receive your proceeds at closing and the new owner will be responsible for what happens to the house.
Remember that if you decide to rent your home and then sell later you will likely be selling it with tenants occupying it unless you can afford to pay the mortgage and keep it vacant. Selling a home with tenants living in it is a challenge at best and a nightmare at worst. They can be very difficult when it comes to preparing your home for sale and allowing showings which often results in lost profits for you.
You’ll Have The Equity From Your Home
This is often the biggest factor that causes people to decide to sell. Selling your home will give you the equity that comes with it.
That could mean the down payment you need for your new home, having a higher down payment than you’d have if you didn’t sell or have an influx of cash in general.
Renting My Home: Factors To Consider
Do You Want To Be A Landlord
Being a landlord is a big responsibility. It’s far more than collecting a check each month.
Being a landlord comes with unknowns because you don’t have much if any control over what tenants do while they occupy your home. Some will be wonderful, pay on time, and treat your home well. Others won’t pay on time and will destroy your property.
If you’re comfortable with knowing you’ll need to answer tenant calls, respond to maintenance requests, track down rental payments and handle getting the home ready to turnover in between tenants then being a landlord might work very well for you.
You could also consider hiring a property manager to take some of the day to day responsibility off of you. They typically charge in the 10% range of your monthly rental income.
Is Your Move Temporary
If you know you’re going to return to the area your home is in renting may be the best option. Selling and buying homes comes with costs and financially it may be best to rent your home out knowing you’ll be returning.
You can always decide to sell down the road if your plans change. Understanding that whether you return or end up selling there will be items to repair or update is important to factor in as part of your decision.
Will Renting Be Profitable
Not every property is going to generate positive cash flow and analyzing your home to understand if it will is a big factor to consider.
To determine if renting your home will be profitable you need to consider all the expenses and deduct them from the income you’ll receive from renting.
Mortgage, insurance, taxes, and HOA or condo fees are just the basics.
You’ll also want to consider maintenance and repairs. Vacancies are frequently an overlooked expense. It is highly unlikely and not realistic to expect to have your property rented at all times.
If you’re going to hire a real estate agent to rent the property or a management company to oversee it both of these come with commissions and fees that you’ll want to plan for. If you plan to rent the property yourself be sure to budget for advertising costs.
While you can get an estimated budget for expenses it’s not an exact science. Be conservative when running your numbers. It’s often very helpful to consult with a local real estate agent to find out what your property can rent for in the current market as well.
Long term you’ll want to keep in mind rental prices go up and down. Just as the market changes for home sale prices it does for rentals as well.
Speaking of rent fluctuating this brings us to market conditions. Many housing markets have seen increases in recent years and are on track to continue to appreciate. While there’s no guarantee your home will go up in value there are indicators to review to guide your decision.
If your home is in a market that is likely to increase over the next couple of years you could hold onto it by renting it out and selling for a higher price down the road.
Condition Of Your Home
Buyers are picky and in today’s market, the vast majority are looking for a turnkey property. Does your home need improvements or updating? If you don’t have the money to do them right now renting could be a good option.
Tenants differ from buyers in that they are willing to accept homes that are less updated. Renting your home could allow you to save up for future improvements before selling at a different time.
This is one that I often see overlooked. If and when your home produces cash flow from renting there are tax consequences to factor in. At that point, your home is an income-producing asset and you will be taxed on the income you make from your rental.
You can write off the costs associated with renting your home and in turn that will lower the income in which you’ll be taxed on but, it’s still something to consider.
Always best to consult with your accountant on taxes. They will be able to consult with you on what can and can’t be written off and how a rental property will impact you.
Careful thought and consideration should be put into your decision to sell or rent your home. It’s not something that should be decided overnight. The right choice depends on what your personal circumstances are. Weigh the pros and cons by considering the factors above and then determine what’s best for you.
Non-Owner Occupied Investment Properties via Luke Skar of Madison Mortgage