Choosing whether to rent or sell your property might appear straightforward to some. Nonetheless, considering the advantages and disadvantages of each option—including possible rental income and property taxes—can extend the decision-making process. Various factors, such as your financial objectives and priorities, play a crucial role, whether it’s about accumulating home equity or reducing debt.
It’s important to consider how you feel about your home and whether it’s a good fit as an investment property. A house with high mortgage payments can sometimes become a financial strain, impacting the entire family. Selling your current home might be a positive step towards achieving financial freedom and stability.
In this article, we’ll dissect the factors you must consider before making this crucial decision.
Assessing the Market
One step before choosing between selling or renting your home is to research rental prices and demand in your area to understand the local rental market.
You must first understand the current state of the local housing market and whether it’s a “seller’s market” or a “buyer’s market.”
A seller’s market is a market condition wherein there is pricing power for the seller due to high demand and a shortage of properties in the real estate market.
Meanwhile, a buyer’s market occurs when selling costs plummet; thus, potential buyers have the advantage of negotiating purchase prices.
Consulting an expert in managing properties and a financial advisor can immensely help you determine your real home value, potential value, and potential profit. They can also compute the interest rate, tax benefits, capital improvements, closing costs, and other expenses associated with either selling or renting your home.
Financial Considerations
You must determine the potential for rental income and property appreciation on the property. If either is determined to generate healthy profits for you, it might be more wise to hold onto the asset for now and establish cash flow.
However, there are also several key costs to weigh against this as well. This includes regular maintenance costs, major and minor repairs, property management fees, and marketing costs.
Property ownership entails a list of responsibilities. Rent-to-own is also an option in the long run. It kills two birds with one stone by generating income for you temporarily while still building towards a home sale. You can also propose a new contract to your renter if you change your mind and want to sell the house.
Deciding Between Renting and Selling
When making the decision, consider personal motivations, such as your long-term goals for your family and your primary residence. Where do you envision yourself living in a few years? Will you be able to attain your dream home by then? What will be your financial situation?
You must evaluate each option's potential return on investment (ROI), including rental income and property appreciation. If you’re going to sell, are you eligible for primary residence exclusion set by the IRA for capital gains tax exemptions? If you’re renting the property, will the monthly rent be paid on time and be enough to help you with your future personal finances?
Let’s dive into a little more of the specifics of each option.
Renting Out Your Home
Renting out your home is a way to earn passive income. However, since you still have mortgage payments and property taxes to pay, you have to make sure tenants pay rent on time. Hiring a property manager can help you with your responsibilities as a property owner and landlord.
You may also consider getting landlord insurance. In the event of property damage or someone getting an injury, it can cover those costs and prevent further legal issues. Regular maintenance and repairs are also needed to ensure your tenants' comfort and safety.
Consulting an experienced property management company ensures your rental property is in safe hands. They can even handle marketing aspects such as advertisements and listings in the rental market to keep your investment profitable.
In addition, you must prepare to conduct background and credit checks on potential tenants. Bad checks and problematic tenants can lead to bad business and disruptions in your cash flow.
Selling Your Home
Hiring a professional is a key factor in selling your home. This will ensure you get the most of your home's value in the real estate market. While it may sound like a walk in the park, it can take longer than you might expect before you successfully hand your home over to its new owner.
Home improvements, such as upgrades and repairs, are necessary to prepare your house for potential buyers' visits. Hiring someone to stage your home may help you boost its visibility and desirability in the market, which can also increase its selling price.
With the growing population and economy, property values have risen in almost every state. It’s highly crucial to get your local real estate market assessed. As a property owner, it’s in your best interest to take every measure possible to increase the profits from your hard-earned investment.
According to the National Association of Homeowners (NAH), preserving your property is one of the best investments you can make.
Making an Informed Decision
Before deciding, you must understand the benefits and drawbacks of selling or renting your house. These include potential rental income, passive income, getting your desired home value, sentimentality, etc.
Use a rent vs. sell calculator to evaluate your options and determine the best course of action. This type of decision-making must not be taken lightly, as it might affect your investments and business decisions long into the future.
Final Considerations
Discover ways to minimize potential renting or selling challenges by consulting a property manager. This step is strongly advised for a seamless and stress-free experience, ultimately saving you time, effort, and money.
Red Team Real Estate offers professional property management services. Our team of experts will help you weigh the pros and cons of renting or selling your property. With years of experience in the real estate industry, we help maximize your profit and help you get your money’s worth. Look into our offered prices and services.
Are you still indecisive on how to manage your property? Contact us today to book an appointment with a professional.
