Should I Sell or Rent My House?
If you’re planning on moving to a new house, then you may be wondering whether you should sell or rent out the one you currently own. Both options have their benefits — selling provides you with cash now, while rentals can be a great real estate investment — but one option may be the best based on different factors.
Here are questions to ask yourself to determine if selling or renting makes more sense, as well as the pros and cons of renting out your house.
Should I Sell My House or Rent It Out?
The goal is to land on a decision that will provide more rewards than issues. However, it’s important to keep in mind that both selling your house and renting it out have their own pros and cons. We outlined five questions to ask yourself when planning the next steps for your property.
1. What Is the Local Demand for Rentals?
Before determining whether or not you should sell or rent your house, it’s important to determine what the local demand for rentals are in your designated area. If you decide to rent out your house in an area filled with owner-occupied properties, then it may limit your pool of qualified tenants and take longer to fill your property.
2. How Profitable Is Your Property?
There are operating expenses you will need to cover to keep a rental property running smoothly. This usually includes your mortgage payment, property taxes, landlord insurance, maintenance costs, and apartment turnover expenses. If you’ve been able to determine a rent price that’s both competitive and can generate a profit each month, you could use that price and a rough estimate of your operating expenses to determine if renting out your property would offer an attractive return on investment (ROI).
3. Are You Ready to Become a Landlord?
Although the money generated from a rental is considered passive income, becoming a landlord comes with responsibilities. You’ll need to advertise your rental, screen prospective tenants, create lawyer-reviewed lease agreements, collect rental fees, and repair any maintenance issues. You can opt for hiring a property manager, but this can add an additional cost and reduce your overall profit each month.
4. Does Your Property Offer Great Amenities?
Properties that offer apartment amenities such as in-unit washer and dryer, stainless steel appliances, or a backyard have a higher chance of catching the interest of prospective tenants. They also allow you to charge more in rent, since the overall value of your property increases the more it can offer. If your property does not offer tons of amenities, then it may not attract interest from local tenants.
5. What Is the Current State of the Housing Market?
In real estate, a seller’s market is when more homebuyers are looking for their next home than available properties on the market. When that’s the case, sellers can charge more in their asking price. On the other hand, a buyer’s market is when less homebuyers are looking for homes than available properties. Sellers often have to bring down their asking price to avoid having their property listed on the market for too long.
If you find that it’s currently a seller’s market, then it may make sense to sell your property. But if that’s not the case, then you can rent out your property until the market favors sellers again.
When to Sell Your Home
If you find yourself in the following examples, it may be a good idea to sell your home versus renting it out.
- You need cash to cover the upfront costs of buying your next house such as the down payment, mortgage lender fees, homeowners insurance, and property taxes
- You’re not interested in managing a rental property or hiring a property manager to help
- You’re qualify for capital gains tax exemptions that allow you to exclude up to $250,000 or up to $500,000 of capital gains from the sale when completing your taxes
When to Rent Your Home
Here are some examples in which renting your home may make more sense than selling.
- You plan on returning to the area the property is located within the next year or two
- You want to generate passive income through rent payments and other rental fees
- You expect the value of your home to increase within the next year or so
- You’re current in a buyer’s market, which can result in selling your property at a lower value than originally purchased
Selling vs. Renting: The Pros and Cons
If you’re siding towards renting out your property, then you may be wondering what the main pros and cons are of selling versus renting. They are the following:
Pros of Renting
Renting out your house can bring in a wealth of rewards if approached strategically.
- Earn passive income: Rent payments, move-in fees, pet rent, and other fees can help you earn passive income. However, you’ll want to ensure the price you charge can cover your operating expenses and is competitive with other rentals.
- Keep a property you’re attached to: If you’ve outgrown your property but still want to keep it, then renting allows you to still cover the mortgage with rent payments your tenants pay.
- Expand your investment portfolio: Turning your property into a rental not only expands your investment portfolio, but it also diversifies it with assets that have a lower risk than other forms of investments.
- Establish more home equity: Not only do rent payments help cover the cost of your mortgage, but they can also help establish home equity during the lease term. The equity can then be used to finance other properties you plan on buying.
Cons of Renting
Even though renting is generally a great alternative to selling, this may not always be the best option for you.
- Handle maintenance: You’ll be responsible for handling most maintenance issues. Failing to do so can leave you open to a lawsuit from tenants or not receiving rent until the issue is resolved.
- Miss out on a seller’s market: Choosing to rent your property during a seller’s market can result in you missing out on earning a profit from your property — especially if you’re able to sell your property at a higher price than you initially bought it for.
- Difficulty to find tenants: Not all neighborhoods have a high demand for rentals, which can make it harder to find tenants for your property. If you find that there’s a higher demand for available properties versus rentals, then choosing to rent out your home can cost you more in the long run.
Looking for an Experienced Residential Property Manager?
If you have a home to rent in the Orlando area be assured there is no substitute for experience. Covering Clermont, Winter Garden, Windermere, Dr Philips, Kissimmee, Davenport, Champions Gate, Hunters Creek and Haines City. We remain focused on this greater Orlando area to ensure we are able to provide outstanding service to our Clients without sacrificing performance. Looking for an experienced residential Property Manager in the Orlando area with a demonstrable track record – look no further.
Ready to make a Move?
Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.