Are you ready to move into a new home? Maybe you need something larger for your growing family or you’ve decided to take a new job in a different state. Whatever the reason, when this time comes, you’ll have a choice to make: sell your home or rent it out? Of course, there is no easy answer. But you should take the time to consider how each decision will play out to determine which path is right for you.
Will the Cost of Rent Cover Your Mortgage and Other Expenses?
Add up all of the current monthly expenses of your home, such as mortgage, insurance, taxes, repairs and more. Then, gather information for similar rental properties in the area and what the tax breaks might be to rent out your house. If the cost of rent will cover those expenses, plus earn you a little extra cash, renting might be a worthwhile option. Remember, however, that costs and prices (insurance and HOA fees, for example) can vary, so this will be an estimate.
How is the Current Housing Market?
The housing market is one thing you can never guarantee. However, you may be able to determine when and if home prices in your area will rise or drop, especially with the help of an experienced, local real estate agent. If you find that similar homes in your area are selling at a lower price than they have in the last five years, talk to your agent about why and if prices are expected to fluctuate. Research rental homes and prices around you as well. Remember, renting doesn’t have to last forever, but a sale is final.
What is the Condition of Your Home?
Like most first-time homebuyers, you may have moved into a fixer-upper. If your kitchen was outdated or your windows were old, maybe you upgraded, increasing not only the value, but the overall condition of your home. Renovations you completed in the time you spent there can help determine the price point for selling. However, if some areas of the home are outdated, renters—more often than buyers—can overlook them since it’s not a permanent commitment. By renting your home, you can utilize the income for future renovations to make it a more desirable property when and if you decide to sell.
Are You Ready to be a Landlord?
Having tenants isn’t always easy. You might end up with someone who respects your property and always pays their rent on time. However, there is always an unfortunate chance that your tenants will pay rent late, or not at all, and damage your property. Each state has different landlord-tenant laws, and some cities and towns even have their own local ordinances. These cover everything from eviction to rent increases to deposits. If you decide to rent out your home and you move far away, you may need to hire a property manager, which on average costs about 10 percent of rental income.
Is Your Move Permanent?
Not every move is a permanent one. If you get transferred to another office location for work or simply want a change of scenery, but plan to come back in the future, selling may not be in your best interest. In most states, you can rent your home for up to three years without having to worry about capital gains tax if you decide to sell during that time. Plus, no one wants to go through the selling process just to come back and start over with the buying process.
Talk to a real estate agent in the area to help determine your timeline, finances and what the best option will be for you.