Big Question: Should I Sell My House or Rent it Out?
It’s not a bad problem to have, really. You own your own home, and you’ve come to realize that you’re not going to live in it forever. Maybe you always knew that, or maybe some big life events have happened and plans have changed. Either way, there’s a big transition coming, and one big question looming — “Should I sell my house or rent it out?”
Deciding whether to rent out your house is a pretty important choice with long-term implications and plenty of big feelings attached. This is a safe space. In this blog post, we will explore the most prudent factors to consider for both choices, to help you make an informed decision that’s in the service of what’s right for you.
Option One: Renting Out Your House
Convenient For a Temporary Move
If your relocation is temporary (e.g., job assignment, travel, military, sick relative, random emergency), renting out your home allows you to retain ownership of the property while generating rental income. This is ideal if you plan to return to living at the home later, or intend to keep the property in the family in the long-term.
A Solid Investment Opportunity
Assuming you live in a thriving rental market, renting out your property can provide steady cash flow and great potential for financial growth. Having an investment property allows you to build equity over time; as tenants pay rent, you pay down the mortgage.
Rental income can also offer tax advantages, including deductions for mortgage interest, property taxes, maintenance expenses, and energy-efficient upgrades.
Landlord Life
There are lots of positives to owning an investment property, but being a landlord can also be a stressful job. Be honest with yourself about the structure of your life, and protect your peace— can you take on property management tasks like tenant screening, repairs, and rent collection, or do you need to outsource these tasks to be a successful landlord?
Self-management of a property saves a lot on cost but requires time, effort, and a good deal of emotional labor. Hiring a property manager makes things a lot easier, but greatly lowers the income associated with owning the property, and it takes a lot of trust to be hands-off enough to really eliminate any stress.
Whether you’re choosing a tenant or a property manager, you’ll want to find someone who will protect your investment with the same care that you do. Being a landlord is also an opportunity to provide fair, safe, and affordable housing to the people in your community. In short, while a rental property can be a great financial investment, it’s not passive income.
Property Maintenance
It’s important to figure in the cost of unplanned house maintenance into your budget when considering being a landlord. You will have an important responsibility to fix problems in a timely manner, and must always have the financial resources to do so.
It can be challenging to estimate how much to budget for maintenance, but a common rule of thumb is to save 1% to 4% of your home’s appraised value, for each year of general property maintenance. For instance, if your home’s value is $300,000, you should plan to save between $3,000 and $12,000 for general upkeep.
Many factors will affect this estimate in your specific situation, and you’ll want to consider the age of your home, the current condition of your home, and any imminent maintenance needs that you’re aware of. Only you can assess your budget and decide how much you’re able to save, but you’ll be happy to have it when something big and important in your house breaks and you can fix it without hesitation or stress because you’ve planned ahead.
Online tools like HomeZada allow you to track your home maintenance tasks and create budgets, checklists for maintenance and chores and use self-assessment tools to help you identify possible issues early and budget for those maintenance items. Planning ahead with a realistic and flexible budget will help keep your home in good shape, and prevent unexpected expenses that put you in debt. Your home is your most important asset, after all!
Option Two: Selling Your House
Free Up Some Money and Lower Your Expenses
Whether you’re going to use the accrued equity from your sale of your home for a down payment on a new property, or just need to sell the property to prioritize other financials, selling your house can give you the chunk of change you need to make things happen.
Better For a Permanent Move
If you’re relocating permanently — especially if it’s long-distance — selling is often the best choice. Managing a rental property from a distance can be challenging, and if you don’t plan to return to the home eventually or pass it on to your family, it makes more sense to take that money and invest it locally in your new community.
Financial and Market Considerations
No matter what the conditions of the market are, one benefit of selling your home is obviously that releasing the asset releases you from ongoing property expenses like maintenance, property management, taxes, and insurance premiums.
It can be helpful during moments of transition to lower your financial responsibilities, and selling property is one way to do that.
Consider the Market
If you’re unsure about selling, consider the current market – is it a strong sellers market, or do buyers have the upper hand in your area? In a seller’s market, houses sell quickly at a high price, and sales tend to be easy and profitable, with less conditions. But if the houses in your neighborhood have been sitting on the market for longer lately, you may not end up getting what you think you deserve.
Can We Help?
Ultimately, the decision to rent or sell your home depends on your unique circumstances and financial goals, so carefully weigh the pros and cons and consider your long-term plans, before making the choice that’s right for you. If you decide to sell your home, Joseph Sabeh and the Joseph Sabeh Group would be honored to help. Contact us to schedule a time to talk.
