Should I Sell Or Rent My House Now That I’m Moving Out?
Andrew Dehan4-minute read
March 03, 2022
If you’re a homeowner who wants to part ways with your current property, you have a couple of choices: selling or renting it out. It’s a major decision that can impact your finances and possible income. So, which is the better option?
It depends on your financial situation. Here’s what you need to know before you decide to sell or rent your house.
3 Factors To Consider Before Selling Or Renting Out Your House
Selling or renting your home is a big commitment. It’s beneficial to assess the housing market since it could make a huge impact on your final decision. What follows is some housing indicators to help you think through your options.
1. Housing Supply
Housing supply can have a huge impact on how easy it will be to sell your home. When the housing supply is low, more people are moving to your area and are buying homes quickly. This increased competition can help you get a higher price as more buyers will be interested in your property at once.
When the housing supply is high, there are more homes available than there are buyers. This can make selling harder and may lower the average selling price of homes like yours.
2. Home Sales
If home sales are skyrocketing, it means there are more buyers looking to purchase in your area and that means more competition for each house on the market.
If home sales drop, there are more homes on the market than there are buyers and you may have trouble finding someone interested in buying your house. This may mean renting your home will be a better choice.
3. Rental Affordability
If the average rent is low in your area and renters are able to spend less than 30% of their paycheck on rent, affordability is high and renters will be easy to attract. However, if the average cost of rent is high and renters have to spend more than 30% of their income on rent, affordability is low.
The more affordable an area is, the easier it will be to find tenants but the less you’ll be able to charge in rent. Think carefully about the market in your area when deciding to rent or sell your home. It may be more lucrative to sell depending on the market.
The Pros Of Renting Vs. Selling
Understanding the market and how it impacts the rentability or saleability of your home is just the first step. You’ll also need to think about the benefits of both renting out and selling your home.
Advantages Of Renting Your Home
Renting out your home rather than selling it to a new owner lets you create passive income,. Below are some benefits you’ll experience by renting your home to tenants rather than putting it on the market:
- Continuing to build equity in your old home
- Maintaining positive cash flow
- Covering your mortgage with rental income
- Diversifying your assets
- Qualifying you for additional tax deductions
Advantages Of Selling Your Home
If becoming a landlord sounds too stressful or you’re simply ready to part ways with your old home, selling might be the best choice. If you decide to go with this option, it can potentially help you get prepared for purchasing your next property.
These are a few benefits of selling your house rather than renting it out:
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The Cons Of Renting Vs. Selling
There are downsides to both renting out your home and selling it. Before you decide, make sure you understand these potential downsides of both becoming a landlord and selling your home.
Although rental properties create passive income for homeowners, it’s far from being a hands-off investment. When you rent your home, you’re not just letting others live in it. You’re also taking on the responsibility of maintaining multiple properties. That means dealing with these downsides:
- The total time investment required
- Dealing with maintenance issues on the rental and your primary home
- Paying property taxes on multiple properties
- Dealing with renters
- Potentially not having enough funds to cover vacancies and evictions
Often, homeowners think that they can sell their home quickly, but the process may not go as planned. These are a few of the downsides you may experience when selling:
Should You Sell Or Rent Your House?
Making the decision to rent or sell your current home once you find a new one isn’t something you should do lightly. Think about your personal financial situation and how much time you have outside of your work and social life.
If you have enough money to cover the down payment on a new home and are confident that you can handle the responsibilities of becoming a landlord, renting out your current home may be a great fit. You’ll have a steady source of income as long as you’re able to keep tenants in the house.
However, if you don’t have tons of cash on hand for a down payment on your new home or aren’t comfortable with the thought of making mortgage payments on two homes, selling will likely be in your best interest. Once you sell, you’ll be able to access the equity you’ve built in your home and use it to help you purchase a new one.
The Bottom Line: Renting And Selling Are Both Great Options
Deciding to rent or sell your home largely depends on your personal financial situation. Examine your finances closely and choose the option that best fits your needs both now and in the future.
Whether you’re planning to rent your current home or sell it to a new owner, you’ll still want to find the right mortgage to help you finance the purchase of your new home. Get preapproved today before you start your search.
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