Should I Sell or Rent My House?


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Should I Sell or Rent My House? Here Is How You Make The Decision.

 

What You Will Read In This Article

 

Are you thinking about selling your old house or moving into a new one? Do you want to downsize or upgrade? Relocate, or move for another reason? If so, you are likely thinking the same thing that many other people are – “should I sell or rent my house?”

This is a big decision, and, unfortunately, there is no easy answer. Renting your home and selling it provides both pros and cons that are unique to your situation. You must weigh each of these carefully when you decide regarding what you should do.

Learn how to sell a house and save thousands with ISoldMyHouse.com.

What to Consider About Renting Your Home?

 

When considering, “should I sell or rent my house,” you have to think about all the factors that go into each option. Renting your home means someone else will be living in it. This comes with a few things you must consider to determine if this is the best solution for your needs. Keep reading for some of the top considerations to keep in mind if you are thinking about renting your home.

Will You Move Back in the Future?

If you have plans to move back to the home in the future, you need to make sure your tenants know this. It should also stipulate a specific rental period in your lease to ensure no legal issues arise when you are ready to return.

This is a common situation for military families who want to keep their property but are sent elsewhere for a specific amount of time. However, others may not be sure where life will take them. In this situation, they want to maintain ownership of their property, and renting their home allows them to do this while giving you the option to sell down the road.

Do You Think the Market Will Go Up or Down?

In some areas, it is virtually guaranteed that the housing market will get stronger and grow in the coming years. If there is potential growth in your local housing market, and you believe your home is going to increase in value, renting allows you to pay the mortgage and sell for more money in the coming years.

Perhaps there are home improvements you need to handle, but you do not have the funds currently. In this situation, you can rent the home for now. Most renters are more accepting of specific issues than homebuyers. By renting your property, you can make the needed upgrades and improvements while your home is rented, and then sell when you have achieved top value.

Monthly Rental Income

If you are like many people, a top consideration will be if your home will generate a positive cash flow when you rent it, or if it will be a money pit. It can be helpful to use an online rental calculator to help you determine the long-term profitability of your home. By using this tool, you can get answers regarding if renting or selling is a good option.

However, you can also determine this by adding up all your renting related expenses. Once these expenses are known, take them away from the potential profits earned from rent and tax breaks.

Monthly Expenses

Renting your property may be appealing; after all, it promises monthly cash flow, long-term appreciation, and more. However, there are several costs and expenses that you need to consider ensuring this truly is the right option for you. Even some of the more apparent fees, such as the mortgage payment you make every month, may come with several surprises.

Keep reading below to find out about the most common costs you should expect when renting your home.

Mortgage

When determining mortgage-related costs, it is essential to calculate the interest and principal. This will help you figure out how much rent you must charge to ensure your rental is profitable.

Insurance

Insurance-related costs can vary significantly depending on where you live. This is especially true if your home is in a location that is prone to fires, flooding, or other issues. Make sure you discuss rates with your insurance representative before you begin renting your property.

Taxes

Similar to wages you earn from your job or dividends from stock, you are assessed income tax on any income earned from your rental property, at your typical tax rate. There is good news here. When you rent your home, you have the option to write off all related costs on your tax return. For example, if your rental income for the year is $50K, and you incurred $40K in total rental expenses, you will only be assessed taxes on the $10K difference.

Along with deducting the cash expenses, you will also be able to claim a deduction for any depreciation expenses. This is a non-cash expense that lets you detect the total amount you have paid to buy the house. Also, if you are dealing with a rental loss, you can use this loss to offset a portion of your income, as long as your adjusted gross income is under $150K. You can ask your accountant or CPA for additional information.

Repairs

It is a good rule of thumb to hold between 10 and 12 months of rent back for your property to cover all repairs and maintenance-related costs. Most experts agree that budgeting 10 to 15 percent of your annual property costs for upkeep and maintenance for your property and any damage caused by tenants is necessary.

To ensure you receive the maximum amount of value for your property when you are ready to sell, you must ensure it stays in good condition.

HOA Fees

Is your home a part of an HOA (homeowner’s association)? If so, remember that even if you rent your property, the fees associated with this must be paid. Some HOAs have rules against rentals, so find out about this before moving forward and renting your property.

Management Fees

If you rent your home and don’t want to deal with maintenance and repair issues and tenant complaints, then hiring a property management company is a smart move. Usually, these property management firms are going to charge about 10% of your total rental revenue.

Another fee that you must pay is if you hire a CPA. They will typically charge around $200 each year to prepare your rental and personal tax returns.

Vacancies

You should never assume your property will be rented the entire 12 months out of the year. It is a good idea to allow around two months of vacancy, when possible when you are setting your rent amounts.

It is smart to keep between one and two percent of your total property value to cover expenses, such as repairs and vacancies. However, the specific amount you need to retain depends on where your home is located. This means getting to know your market and how long rental properties usually remain vacant is smart.

Advertising

Finding a suitable tenant for your home takes time and money. Charging a nonrefundable application fee is an excellent way to help offset these costs.

To find a good tenant, you must also make concessions to advertising the property. There are several advertising options to choose from, including online (which is usually the best option), in a newspaper, or by another method. Be sure to keep these costs in mind, as you will have to advertise each time your property becomes vacant.

Miscellaneous

You may incur other fees, too. For example, do you plan to run a credit or background check on potential tenants? If so, this will cost you more money.

Do You Really Want to Be a Landlord?

Owning a rental home is often stressful because you have minimal control over what the tenants are doing in your home. While you may get great tenants, who always pay rent on time and take care of the property, this isn’t always the case.

Even if you find decent tenants, you still have to answer phone calls and inquiries, keep up with maintenance and repairs, and more. While you can choose to hire a property manager, you have to pay these costs, too.

Tenant/Landlord Laws

You also have to learn about the landlord-tenant laws in your area. These are the rules that govern when and how you are allowed to evict tenants, when you are allowed to go onto the property and when you must return your tenants’ security deposits. You can find your state’s rules via your state consumer affairs website. You can find specific city municipal codes through Municode.

The rules and regulations in place for your local area may impact your ability to earn a profit from renting your home. While some areas will favor landlords, others give more rights to tenants.

We Negotiated Lower Realtor Fees For You

ISoldMyHouse.com has negotiated significantly lower commissions with some of the best real estate brokers so you don’t have to. We will match you with a top local agent in your area that will sell your house (without sacrificing service) for a much lower fee!

 

Find An Agent Near You!

 

What to Consider About Selling Your Home

 

When trying to decide “should I sell or rent my house,” you must also get to know the factors related to selling. Some of the most important factors are listed here.

Selling Is Final

There are several benefits offered by selling your home. For example, you are free from this property – you no longer have to worry about it. All the burdens that go along with renting your home can be avoided when you decide to sell.

While this is true, selling your home can be stressful. However, when the process is done, you get the money and can move on to your next step in life.

One situation where selling your home is beneficial is if you need to or plan to move to a different state. There are some who aren’t aware of the stress that comes with owning more than one home. Do you really want to be called in the middle of the night to handle a problem with your rental? If not, selling is the best option.

Avoid a Market Downturn

Do you have a feeling, or have you seen signs that the real estate market is going to take a downturn in recent years? If so, it makes sense for you to get out right now.

When you sell your home, it lets you generate as much income as possible and earn more revenue than if the market falls in the coming years.

However, there is no way to predict what will happen, and you may be wrong about what is to come. If you want to avoid the possibility, though, selling may make the most sense. By having the equity out of your home, you can invest this money and possibly make even more with it.

Renting your home may result in the money being tied up for years.

Potential Tax Law Benefits

Several possible tax laws may make selling beneficial. For example, one law can help exclude your sale from capital gains taxes of $250K alone or $500K if you are married. Some limitations apply based on your tax bracket, but for most homeowners, this law means that you can save on larger sales.  Also, the requirements for the law change, which means this may not always be applicable.

Avoid Tenant Issues

Do you really want strangers in your home? This is the most significant investment you will probably ever make – do you want to deal with people potentially messing things up and causing damage?

If you are continually thinking about what may happen in your home, you are not going to enjoy life. Also, other stresses are related to owning a rental property, such as covering the costs of maintenance and repairs.

If you decide to sell, you do not have to worry about any of this. You will have the money from the sale, and the new owner will have to deal with any issues that arise.

Selling Is Expensive

While selling may seem like a good idea, it can be expensive. You need to consider this carefully. You have to consider factors like listing the house, hiring a real estate agent, advertising the house for sale, and more.

The costs related to selling your house can add up quickly. As the price goes up to sell, the potential for making profits off the sale goes down. It is best to “crunch the numbers” before deciding if you will sell to see if this is a profitable decision.

We Negotiated Lower Realtor Fees For You

ISoldMyHouse.com has negotiated significantly lower commissions with some of the best real estate brokers so you don’t have to. We will match you with a top local agent in your area that will sell your house (without sacrificing service) for a much lower fee!

 

Find An Agent Near You!

 

How to Weigh the Pros and Cons

 

When it is time to decide if you want to rent or sell your home, you may be hesitant – you may be fearful of making the wrong choice. In many cases, you may regret your decision to rent your house. If this happens, and you decide it is time to move on, you must figure out the best tips to sell a home with tenants. This is no easy process.

Risk vs. Reward

Are you and your family willing to take the risk that is created with either renting or selling? Take some time to consider if the reward you receive will be more substantial when you rent or sell. This is going to help you make the right decision for your short- and long-term goals.

Your Personal Situation

When it comes to your personal situation, you have to consider the factors here. For example, do you plan to go back? If so, it can make sense to rent the house, have someone in it to ensure issues do not arise and have confidence that things are being taken care of. However, if you don’t want the hassle of managing a rental or paying someone to do this for you, selling could be the better option.

When trying to decide, “should I sell or rent my house,” be sure to consider your personal situation carefully. By considering your personal situation and speaking with your family, you can determine what is right for you and your family.

How to Make a Decision

Renting your house, similar to other investment strategies, comes with a certain degree of risk. If your home value goes up as time passes, rents keep going up, and you can keep tenants in your home, renting may provide you a good return on investment. However, if rents fall in your area, if your home’s value does not go up as fast as you expected, or if your tenants do not pay, this may not be the best investment.

It is a good idea to have cash on hand to cover any emergency situations that may arise. It is also beneficial to speak with a financial planner before deciding.

Regardless of what decision you make – renting or selling – it is not one that should be taken lightly. This is a big life decision. If you make this decision on a whim or do not consider all angles and possibilities, you may wind up regretting what you decide.

With the information above, you should have a good idea regarding what to expect and what will happen with both of these options. With this information, you will be well on your way to deciding on the question, “should I sell or rent my house?”

Learn how to sell a house and save thousands with ISoldMyHouse.com.

 

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