Making the Move: Sell or Rent?
Making the decision about what to do with your house when you’re ready to move can be challenging. Should you sell it and use the funds for your next chapter, or rent it out to build long-term wealth?
This is a common dilemma for homeowners, and the answer isn't always clear-cut. Whether you're intrigued by the potential rental income or concerned about the responsibilities of being a landlord, there’s a lot to consider.
Here are some key questions to help you determine the best option for your situation.
Is Your House Suitable for Renting?
Even if you’re interested in becoming a landlord, your current house might not be the best candidate for a rental property. Consider if you'll be moving far away, which could make ongoing maintenance difficult, if the neighborhood isn’t ideal for rentals, or if the house needs major repairs before it could be rented out.
If any of these issues apply, selling might be the better option.
Are You Prepared for the Realities of Being a Landlord?
Managing a rental property is more than just collecting rent. It can be time-consuming and sometimes stressful.
For example, tenants might call you at inconvenient times with maintenance requests, or you might need to address damage caused by tenants before the next lease starts. There’s also the possibility of dealing with late payments or tenants breaking their lease early. As Investopedia notes:
“It isn’t difficult to find horror stories of landlords troubled with more headaches than profits. Before deciding to rent, consider talking to other landlords and doing a detailed cost analysis. You might find that selling your home is a better financial decision and less stressful.”
Do You Understand the Costs Involved?
If you're considering renting out your home mainly for extra income, remember that there are additional costs to plan for. As Bankrate outlines:
- Mortgage and Property Taxes: These expenses remain, even if rental income doesn’t cover them fully.
- Insurance: Landlord insurance, which is about 25% more expensive than regular home insurance, is necessary to cover damages and liabilities.
- Maintenance and Repairs: Plan to spend at least 1% of the home's value annually, more if the home is older.
- Finding a Tenant: This includes advertising costs and potentially background check fees.
- Vacancies: You’ll lose rental income if the property is empty between tenants.
- Management and HOA Fees: A property manager can ease the burden but typically charges around 10% of the rent. HOA fees are also an additional cost, if applicable.
Deciding whether to sell or rent out your home is a personal decision based on your circumstances. Evaluating your options carefully will help you make the best choice for your future.
Weigh the pros and cons and consult with professionals to feel supported and informed as you make your decision. We’re here to help you through the process.
