Should I Rent Out or Sell My Home?
Is your family outgrowing the house you’re currently living in? Does a job offer have you considering a move? Your gut reaction might be to place your house immediately up for sale, but could renting out your home be the better option? Make your decision carefully because it could affect your personal economic situation for years to come. Here are some pro tips to help you make the right choice.
Evaluate the Current and Future Market
Ask a real estate professional to help you conduct a comparative market analysis to determine the value of properties in your neighborhood within the last six months. Compare these to values from the last three or four years to help you determine where the market has been and where it’s headed.
If values are on the rise, you might want to rent out your home for six to 12 months and give it more time to appreciate before you sell. If values are on the decline but you can still make a profit, now might be the time to sell before the value drops any further.
Compare Your Expenses to Your Cash Flow
If you decide to rent out your home, you must determine if this choice is economically feasible. Calculate the monthly expenses you’ll continue to carry, including mortgage payments, property taxes, homeowner’s insurance, HOA fees and more.
Based on the market analysis your real estate professional helped you perform, determine how much monthly rent you can charge. Compare your expenses with the cash flow from rent payments to determine if renting really is a lucrative option.
Consider Personal Factors
The decision to rent out or sell your home is more than just a financial decision; it’s also a personal one. Being a landlord isn’t for everyone. You might be called at inconvenient times to deal with appliance repairs or a flooded basement. You’re also held financially responsible to take care of these issues for your tenants. How much time do you really have to spend on your rental property?
Fortunately, if your calculated financial return is lucrative but you’re not interested in being a landlord, you have another option: hire a property management company to take care of everything from marketing the property to vetting potential tenants to providing emergency maintenance services. With a company like this by your side, you could have the perfect opportunity to rent out your home, assuming the housing market and other financial factors fall into place.
Weigh the Pros and Cons
After taking these considerations into account, don’t forget to weigh the overall pros and cons of renting out vs. selling your home.
Pros of Selling
- Free up equity and put that money toward purchasing a new home.
- Enjoy tax-free capital gains if you qualify.
Cons of Selling
- You risk missing out on the potential future appreciation of your property.
- You risk taking a loss if selling the property in a bad market.
Pros of Renting Out
- Benefit from property appreciation.
- Enjoy certain tax breaks.
- Receive a steady stream of income from your tenant’s rent payments.
Cons of Renting Out
- You risk potential problems with tenants.
- You lose tax-free capital gains if you decide to sell in the future.
- You risk damage to the property.
- You place a large cash commitment in multiple properties.
Coakley Realty is your premier source for quality real estate or property management services in Washington, DC, Maryland and Virginia. To learn more about how we can help you either rent out or sell your home in the area, please contact Coakley Realty today.