You’ve decided it’s time to leave your current home and either upgrade, downsize, or relocate to another one. It may have crossed your mind that you could either sell your house or rent it out.
This is a big question with pros and cons that deserve some serious attention. In this article, we look at turning your property into a rental versus selling it.
Before you can decide whether or not to rent or sell, you need all the numbers in front of you.
You want to remember as well that not all homes make good rental properties. What’s more, it can often be determined by where you live if it will be a good investment.
The first thing you need to know is what you can reasonably charge for rent. Looking online doesn’t always give you an accurate picture of the rental market, we recommend that you request a free rental analysis to get an true market evaluation.
Then, you need to think about expenses such as the mortgage, insurance, and property taxes. You still have to pay these even if you are renting your home. There’s also property management fees, maintenance, and vacancies when they occur.
So, take all of your expenses and subtract them from the rent you can charge. Don’t forget that from time to time you will have unexpected costs in the way of things to repair and unforeseen vacancies. A good property management company will help you plan for these costs in advance, ask them how they do this.
Once you’ve looked at the numbers, you’ll have a better idea of whether or not renting your property will be profitable.
Pay Down of Principal
One huge benefit of a profitable rental property is your renters will be paying off your mortgage each month and building equity in your home, for you!
If your home is paid for, you’ll pocket more money directly. Do be sure that you charge enough for rent to pay your mortgage and enjoy some profit.
This is another good reason to rent instead of sell, especially if you have a lot of equity in the home and little mortgage left to pay off.
Odds are that in today’s market your house will go up in value from year to year. This makes renting a good idea. As your home appreciates, you can also start to charge more in rent.
When it comes to renting versus selling, the answer is easy if you expect to return to the home at some point.
If this is the case, renting makes good sense. Instead of selling one home to buy another, you rent out your property so you can move back in at a later time.
This allows you to keep your options open in the future.
Many owners don’t want to deal with rental property management, and this is why we always recommend using a professional property management company who is properly licensed and has a great track record in your area.
If you are certain you want to sell, you should understand the potential costs. Typically we recommend subtracting 7% from your expected home sales price to account for sellers commissions, taxes, and other common seller costs; to determine your total expected revenue from the sale. Then subtract any mortgages and liens to determine your profit from the sale, keeping in mind that you may have to pay additional taxes on the profit.
If you want assistance with selling your home, we here at PMI East Lyme are a licensed brokerage and have Realtors® to help you sell your home.
A rental property can be an excellent investment. It’s even better if you already have equity in your home before you decide to rent it out.
Not only will the rent you collect help you pay off your mortgage, but you’ll also reap the tax benefits, and make some money.
The bottom line on renting versus selling your property comes down to your goals; we can help you put the numbers together to determine; should I sell or rent my home.
At PMI East Lyme Property Management, we are your full-service residential property management company with licensed Realtor®. We are here to protect your investments every day and make investing in property easier.