Renting vs. Selling Your House
When you are about to move, it always crosses your mind: What if we rented our old house? People love to ask themselves this question because real estate can be such an attractive and lucrative investment. And the easiest way to get into real estate investment is to rent out your old home.
But there’s a reason why so few homeowners choose to act on this impulse. A lot goes into the debate over renting vs. selling your house, and it’s a lot of work to make renting your old home a true possibility.
Are you currently considering renting vs. selling pros and cons? If so, here’s a look at what you should think through when you find yourself asking that question that so many have asked already this year: Should I sell my house or rent it out?
What Do You Want to Achieve?
Here’s another question to ask yourself: What are you looking to get out of the house? That is, what are your goals as a real estate investor? Some investors see renting out an old home as a long-term investment. They understand that renting out an old home puts you in the position of being a landlord — in addition to everything else that’s going on — and they are comfortable with that position. After all, renting out a property for several years and past the mortgage payoff date is a great way to enjoy a huge return down the road.
But, if you’re looking to limit your responsibilities and make life less stressful, renting your home may not be the best path. Also, renting rarely provides an immediate windfall. You may be able to fully cover your month-to-month expenses, but coaxing a profit out of a rental property when you still have a mortgage is tough to achieve. You’ll still be paying principal and interest, taxes and insurance, and you’ll also be on the hook for repairs and maintenance. And what if your tenant moves out and you have a lull before filling the vacancy? You’re still on the hook for your monthly obligation, but there’s nothing coming in to offset it.
Those who are successful when choosing to rent out an old home are the ones who have a realistic picture of what it’s going to take. They know that it’s more challenging, and they go for it anyway — knowing that there’s a huge opportunity to increase return down the road.
Other Key Decision Factors
Renting vs. selling analysis isn’t all about effort and long-term vs. short-term. There are several other key decision factors, including:
- Are you coming back? Is there any chance you may someday come back to the home? If so, renting might be the perfect solution. For example, maybe you’re being transferred for work, but you anticipate that it’s a short-term move. If you’re going to be back in the same area in the next few years, why not continue building equity?
- Can you qualify? One of the biggest challenges homeowners face in the renting vs. selling your house debate is getting financing. You’ll need to qualify for a loan on a new home while considering your monthly obligation on the existing home. Some lenders in some states will give you a credit for potential rental income when working your debt-to-income ratio. But, even then, some homeowners need to pull equity from an existing home to make enough of a down payment on qualify for financing on a new home.
- Are home prices rising? The main reason to rent a property is to sell it years down the road for a significant return on investment. But, if you bought at the top of the market and you don’t see home prices rising much more in the mid- to long-term future, there’s not much of a return to hold out for.
- Is your home in good shape? If your home is going to need significant repairs and maintenance in the near-term future, consider selling and transferring those obligations to the new owner. The last thing you want to do after renting out your old home is to replace an air conditioner or water heater. These types of huge payments are going to reduce your overall return on investment.
Make Life as a Landlord Easy
Are you trying to decide whether to rent or sell a house in 2017 or 2018? At Harrisburg Property Management Group, we have the solutions you need. As an experienced property manager, we can offer expert guidance on whether to rent or sell a house at a loss, or whether to rent at all. Our recommendations are rooted in our deep experience in the Harrisburg area. And, if you do move forward with renting out a house, we can also provide support in management of your property.
Contact us today about renting vs. selling your house in Harrisburg.
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