When you move from one house to another, it can be a wonderful time. Everything is fresh and exciting, but it can also pose a dilemma that requires some thought. Should you sell your existing house, or rent it out?
While many homeowners opt to sell their former house, you may find that after you look into all your options, it will be possible to buy your new house and keep the old one at the same time. And that can be a way to bring in extra income—as long as the situation is managed properly.
To make this decision wisely, you’ll want to consider the pros and cons first, and be well informed. Consider the following factors, and remember—our team is here to help you navigate any questions you may have.
Signs It’s a Good Idea to Sell Your House
Here are several reasons homeowners opt to sell rather than rent a property.
You Need the Equity from Your Current Home
If your plan is to upgrade to a larger home, you might need the profit from the sale of your old house to put a down payment on your new purchase. Or, the profits may be beneficial for other purposes, such as allowing you to retire early or travel more often.
It’s a Seller’s Market
During times when the available housing inventory is low, buyers are usually prepared to pay more. If your home is priced and marketed well, it is likely to sell quickly and for a great price. So, if you’re ready to let the house go, a seller’s market can be an excellent time to cash out.
You Can’t Make Enough in Rent to Create Good ROI
Homes with a higher value tend to make less than ideal rental properties. This is because it’s harder to charge a significant enough rent to cover the mortgage payments, insurance premiums, and maintenance a higher-end home requires. If you’re not getting a good return on your investment from a rental, it’s better to sell it.
Too Much Is Involved in Caring for the House
Sometimes, being the owner of a rental property is simply too much effort. For example, you’ll have to deal with challenging situations at times, such as evicting a non-paying tenant. There will be times the property sits vacant. And there will be upkeep to plan for, especially on older properties. If none of this sounds doable, it may be better to sell the property.
Signs It’s a Good Idea to Rent Your Property
Here are some common reasons that your home may be worth renting out.
You Want the Additional Income
If you can afford to keep the property, it could be a smart move to rent it, especially if you can build equity in it and sell it for a higher price down the road. Just be sure the rent covers your mortgage payment, insurance, taxes, and general maintenance.
Your Property Is Valued in the Rental Sweet Spot
Houses worth between $75,000 and $200,000 tend to be the best rentals because they can usually be rented for enough money to cover the mortgage, plus add a little profit to your bank account every year.
Demand Is High for Rentals in Your Area
Are you located near a university or a large corporate headquarters? Are good rentals hard to find in your area right now? These are situations where the demand is high, meaning you can ask for a higher monthly rent.
Tip: A savvy REALTOR can help you find a tenant or provide valuable insight as to whether your home and its location are appealing to renters.
You Want to Live in the House Again One Day
If you’re relocating because of family demands or a job offer that’s too good to pass up, you may not feel ready to let your existing home go for good. Perhaps you see yourself moving back in a few years or selling it to your children when they’re older. Renting it out might be a smart way to keep the property while enjoying the passive rental income.
Additional Factors to Weigh Before You Decide
What Are Your Tax Implications?
When you become a landlord, you’re essentially a small business owner. And that means the IRS will pay more attention to you. Know what’s expected, and how the income may affect your tax liability.
Tip: There are many resources out there to help you handle the tax side of things, and it isn’t as complicated as it may seem. But it’s worthwhile consulting a CPA or tax lawyer for guidance.
Should You Be the Landlord or Employ a Management Company?
All the important responsibilities of a landlord can truly be a full-time job. If you like the idea of spending your own time managing properties, and if you have experience with real estate or home improvements, handling the landlord duties personally may be a good fit for you.
However, passive income is only truly “passive” when you’re not working to take care of your assets. Choosing a property management team to handle the daily details can lighten your load as a rental property owner.
Make It Easy to Rent Your Property With McGraw REALTORS
If you’ve considered all the factors and are confident that renting out your real estate makes sense, invest in the right support system to help you do it right.
At McGraw REALTORS, we bring together property owners and tenants to create perfect matches. Our team will go the extra mile to help keep your property occupied with trustworthy tenants. And we’ll do all the legwork, like running the background and credit checks, overseeing inspections, managing leases and handling emergencies.
Discover how our property management team can make the process of renting your property streamlined and stress-free.