You’re moving. But what do you do with your existing home? You can rent it out or you can sell it, depending on your current situation. Either could be a good solution for you, but it depends on your needs. Here are some things to consider.
Renting vs. Selling: The Advantages and Disadvantages
Generally, renting brings in long-term equity and consistent income. Selling brings in immediate income in the form of a lump sum. People choose to rent if they want to accumulate equity and build up revenue streams. A good example is someone who wants to continue renting into retirement. People choose to sell if they want to get rid of a property, want to be able to put that money toward their next property, or just don’t want additional responsibilities.
Whether you should rent or sell your house is going to depend primarily on your financial situation, your goals for the future, and the condition of the house. Selling (especially to a cash home buyer) is always going to be the simplest and most direct solution. Consequently, it’s more or less a question of whether you want the responsibility of being a landlord and whether you’re interested in making it a second job.
When Should You Rent a Property?
Renting a property makes sense if you’re able to maintain that property. Being a landlord is difficult. You’re still responsible for repairs, both major and minor. If something breaks in the middle of the night, you have to fix it.
It’s required that you maintain the property in a livable and habitable status. If the property becomes infested with pests, you may be responsible. If there’s water damage, you may be responsible. You can even be responsible if the air conditioner or heater goes out.
But if your house is in mint condition, and you’re handy enough to make repairs on your own, renting can give you solid revenue month after month. You just need to make sure that you can maintain tenants — something often easier said than done. In some areas, owning rental properties is extremely profitable and can give you income that you can put into other types of investments.
When Should You Sell a Property?
Sometimes, you just want to get the cash and go.
If the property requires extensive repairs, selling it is usually best. Otherwise, you may not recoup the amount that you’re spending on repairs for some time. It can even be better to sell a property and purchase a smaller property as a rental. Smaller homes are more often rented than larger homes.
Furthermore, if you don’t have the time to manage a property, vet potential tenants, and potentially undergo evictions, it’s best not to try to rent. Being a landlord is time consuming. While you can hire a property management company, this usually works best for those with a few units or more, rather than just one home.
Consider that the mortgage still has to be paid. If your mortgage payments are close to rent payments, you could find yourself falling behind very quickly if rent isn’t being paid. It may be better to refinance your property or just sell it.
How Can You Tell Whether You Should Rent or Sell?
Ask yourself the following questions:
- Do I want to be a landlord? This is more than just an investment; it’s a part-time job.
- Would the money do me more good in a retirement account? Rather than being a landlord, you could sell the property and put the money toward other investments.
- Will I need the property in the future? Sometimes, people will rent out a property temporarily so they can use it later in retirement.
- What repairs will it require? Tenants often hold units to high standards. In competitive markets, you may need to update the entire property.
- Am I going to stay in the area? It’s very difficult to manage a property if you aren’t in the same location, even with a property management company.
- How is the current housing market? If the market is hot, you could make more selling your property now and getting into other investments.
- How is the rental market in the area? In some areas, rental income isn’t very significant; it’s in larger cities that it tends to be substantial.
Are you ready to sell your property? There’s no obligation. Contact Geaux Home Buyers for a quote today.