You’re a software engineer who got a new job in Silicon Valley. However, you live in Georgia.
The job is your big break, and it will boost your career. You must go through the process of selling your home, but you’re not keen on selling it. You’ve had bad experiences in the past, especially with real estate agents.
Also, you notice that neighboring homes have remained on the market for months. You begin to weigh the consequences of renting vs selling your home.
Should I sell or rent my house?
If you choose to rent out the home, you’ll benefit from steady income. However, the duty of a landlord can be a hassle, especially if you have no experience.
On the other hand, selling your home allows you to walk away from the property instead of devoting additional funds to maintenance, mortgage payments, and insurance. This article will highlight the pros and cons of renting vs selling a home. Read further if you wish to know more.
The Pros of Renting
Becoming landlord won’t make you rich in the short-term, but you may have more options during tough times. If you’re uncertain about the future, keeping your home is a nice cushion as you sort things out.
Renting the home is also a great option if you’re unable to sell your home at the desired price. Home rentals may also be a better option in the event of a housing market dip, and the rental income may generate some quick cash.
In addition to income, you can take advantage of numerous tax benefits that can mitigate your cost overhead. You can deduct a variety of variables, such as:
- Gardening and cleaning
Despite the tax benefits and stable income, you may encounter scenarios where renting out the home is too burdensome.
The Cons of Renting
Before entering the landlord business, assess the costs of being a landlord. Property owners must contend with a wide array of ongoing expenses, such as:
- HOA dues
- Management (if you hire a property manager)
- Vacancy costs
All of these factors can eat away at your profit margins if you don’t review your finances carefully. Additionally, determine if the rent that you’ll collect will sustain your property obligations.
To get an idea, check the rental rates in your area. You can also use a rental calculator to see if the rental option is viable.
Additionally, research your local real estate market to see if housing prices will go up or down. If rent in your area won’t generate consistent profits, consider selling the home instead.
Most importantly, determine if you want to be a landlord. Sell your home if you you intend to become a landlord begrudgingly. Being a landlord is a heavy commitment that’s often stressful.
For example, you may get a tenant who never pays rent on time, placing you in a precarious position when your mortgage due date arrives. Also, you could deal with a tenant who damages your property regularly, resulting in additional cleanup and maintenance costs.
If you have great tenants, you must still deal with the ongoing stress of maintenance costs. As a landlord, you’re responsible for all repairs and maintenance requests.
If a home needs a new roof, for instance, you must pay the full costs. Your insurance would cover the cost of roof replacements, but you must still pay deductibles and monthly premiums to cover the pricey repairs.
Pros of Selling
Current tax laws allow you to sell your home without paying capital gains taxes. With that, you can avoid paying the capital gains tax if you sell your home for less than $250,000. If you’re married, you wouldn’t pay capital gaines taxes if you sold the property for less than $500,000. This means that most sellers can sell the property without paying a hefty tax sum.
If you’re more worried about income than tax benefits, the selling option also provides fast cash in the form of a down payment. You can use a down payment for your next home, or for your other financial needs. Moreover, a downpayment increases your chance of affording a new home.
Best of all, finalizing a sale means you won’t have to contend with the hardships of being a landlord. If you buy another property and rent out another, you must deal with the burdens of two properties. Selling your first home means that you can concentrate on the mortgage and upkeep of your current property.
Cons of Selling a Home
If the proceeds from the sale cannot cover your future expenses on a new property, then renting out the property may be a better solution. If property values are low, you risk selling your home with significantly less than you paid for it.
To know the true value of your property, have an agent conduct a comparative marketing analysis for you. From there, your agent should provide you with a net proceeds worksheet that outlines the following:
- Realtor fees
- Closing costs
- Other miscellaneous expenses
All of these expenses can erode take-away from the sale and may leave you with less than you anticipated.
Also, be prepared for a lengthy process when you put your home on the market. Also, don’t expect an immediate buyer. It could take a few months before a buyer is willing to make an offer, and the buyer may want to pay less than what you’re asking.
Therefore, you will need additional time for the negotiating process. When both parties agree upon a price, it takes an average of 30 to 45 days to officially close on a home. If you need to move in a hurry, selling isn’t the best option.
Should I Sell or Rent My House Depending on Market Conditions?
There are times when renting vs selling your home is contingent on market conditions. If your housing market has lower housing prices, you may walk away disappointed.
As a result, renting the home may be a better answer. However, becoming a landlord is a full-time job that comes with many commitments.
If you’re wondering, “should I sell or rent my house if I don’t want to become a landlord?” you should consider selling it. You should only become a landlord if you intend to commit to the job.
Interested in reading more? Read more on our lifestyle section to gain insight into other interesting topics.