Deciding the fate of your house when you’re ready to move can be a significant decision. Should you sell it and use the proceeds for your next venture, or keep it as a rental to build long-term wealth?
This is a common dilemma for many homeowners, and the answer isn’t always clear-cut. Whether you’re intrigued by the potential income from renting or apprehensive about the responsibilities of being a landlord, there’s a lot to consider.
Let’s explore some crucial questions to help you make the best decision for your situation.
Is Your House Suitable for Renting? Even if you’re keen on becoming a landlord, your current house might not be ideal for renting. Perhaps you’re moving far away, making maintenance a hassle, or the neighborhood isn’t great for rentals. Maybe the house needs significant repairs before it can be rented out.
If any of this applies, selling might be your best option.
Are You Prepared for the Realities of Being a Landlord? Managing a rental property involves more than just collecting rent checks. It’s a time-consuming and sometimes challenging job.
For instance, you might receive maintenance requests from tenants at all hours or deal with tenants causing damage that needs repairing before the next lease starts. You may even face issues like late payments or broken leases. Investopedia highlights:
“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 to generate extra income, remember there are additional costs to plan for. As an article from Bankrate explains:
- Mortgage and Property Taxes: You still need to cover these expenses, even if the rent doesn’t.
- Insurance: Landlord insurance costs about 25% more than regular home insurance and is necessary to cover damages and injuries.
- 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 involves advertising costs and potentially paying for background checks.
- Vacancies: If the property sits empty between tenants, you’ll lose rental income.
- Management and HOA Fees: A property manager can ease the burden but typically charges about 10% of the rent. HOA fees are an additional cost, if applicable.
Bottom Line Ultimately, deciding whether to sell or rent out your home is a personal choice that depends on your circumstances. Whatever you decide, taking the time to evaluate your options will help you make the best choice for your future.
Weigh the pros and cons carefully and consult with professionals to ensure you feel supported and informed as you make your decision. That’s what we’re here for.