[ad_1]
The post Should I Sell or Rent My House? | Key Considerations appeared first on Millennial Money.
The decision to sell or rent your house is a tough one. On the one hand, you could sell and be done with it! On the other, recurring rental payments sure sound appealing.
Keep reading to learn about the main considerations that should influence your decision.
Reasons to Sell Your House
Here are some scenarios where it makes sense to sell your house.
You’re not attached to the property
People tend to get emotionally attached to properties. If you don’t feel that attachment, it will be much easier to let go.
Here are some examples of low-attachment situations:
- You’ve lived there for only a few years
- You no longer enjoy the surrounding neighborhood
- You’re recently divorced
- You have an urge to try a different lifestyle (e.g., moving to the city, countryside, or abroad)
If you have a “whatevs” attitude to your current home, now might be a good time to think about putting it on the market.
You’re short on cash
If you’re in a bind for cash and are ahead on your home investment — meaning you’ve gained some equity and profit on it — it may be a good idea to sell.
By doing that, you can free up cash for your next home’s down payment and closing costs. Alternatively, you can pay down debt or save the gains you made.
The house isn’t ideal for renting
Not all houses make great rental homes. Often, the home’s location makes it difficult to put on the market for rent. For example, it may be out in the middle of nowhere or in a town that people aren’t flocking to.
You have substantial equity
If you own substantial equity in a home and sell it, you might have a pretty nice profit after the deal closes. On the other hand, if you have barely chipped away at your mortgage balance, you’re likely to lose money when you sell.
You want to cut back on expenses
Depending on where you live, homeownership can be very expensive. If you find yourself in a situation where all your extra cash goes toward paying taxes and maintenance bills, it might be time to sell.
Tips for Selling Your House
Here are a few things to consider when trying to sell your home.
Hire a great agent
When it’s time to sell your home, your real estate agent is your best advocate. Your agent will help you decide when it’s a good time to list your property, what is a competitive price, and how to stage it.
Your realtor will also connect you with trusted contractors, lawyers, and inspectors you may need to call on during the sales process.
Be realistic about the price
Talk to your agent about market conditions and defer to them when negotiating. Selling can be tricky, and your home’s value fluctuates based on demand and market conditions.
Your best bet is to listen to the experts instead of taking matters into your own hands. Overpricing your home or delaying a sale to time the market can be costly.
Let the agent stage the house
Once you decide to move forward with your home sale, treat it like someone else’s house. The agent may want to redecorate, and you’re going to have to keep the place in pristine condition for walkthroughs.
Be patient during this process, and work with the agent when staging. It could lead to a bigger profit.
Learn More:
Selling Pros and Cons
Pros
- Potential net gain
- No monthly upkeep
- Ditch a property you don’t want
Cons
- Potential net loss
- Selling fees
- No recurring income
Reasons to Rent Your House
Here are some reasons why renting out your house might be favorable.
The property is in a rentable location
If your house is in an amazing location, you may want to consider renting it to get a strong monthly cash flow.
For example, your house may be near a ski resort or in a city where there is a steady influx of visitors who need a place to stay. If that’s the case, you can request a rent price that will cover the cost of your mortgage and then some.
You can afford a second home
It’s a good idea to analyze your monthly cash flow and determine whether you can afford to take on a second mortgage.
If so, you may want to reconsider refinancing your current property, or using it as collateral to fund your next mortgage. This plan could work as long as your tenants’ monthly rent payments cover your mortgage payments.
You may want to move back
If there’s any chance you may want to come back to your old house, consider renting first. Renting a house can provide you with the ability to come back if you choose.
You can afford the expenses
Homeowners are often surprised to learn some of the hidden costs associated with renting. To successfully rent your place, you need to be able to cover a variety of costs. Ideally, your tenants’ rent payments will cover them for you.
Here are some of the top costs to consider.
- Mortgage: You’ll still have to make your monthly mortgage payment.
- HOA fees: Homeowners association (HOA) fees can be very high, costing hundreds of dollars or more per month.
- Insurance: Some people need to pay homeowners insurance in addition to private mortgage insurance (PMI) for the lender’s protection.
- Vacancies: Vacancy occurs when a place goes unoccupied. It may be worth looking into unoccupied home insurance.
- Property management fees: Property management companies can help you with leasing, tenant issues, and daily maintenance and repairs — for a price.
Tips for Renting Your House
Here a few different ways to earn money renting your house.
Look into Airbnb
If your house is in a prime location, you may have more flexibility putting it on a site like Airbnb than by going through a real estate agent. Airbnb is easy to use, although the site does take a commission.
Rent different parts of your house
You may be able to make more money by breaking down your house into several smaller rental opportunities.
For example, you can put rooms on Airbnb or rent storage space in your basement, attic, or garage. Yard space can be rented to local boat or jet ski owners. You can even rent your driveway to neighbors who need more parking.
Use a property management service
Maintaining a rental property can be a full-time job. Many property owners choose to hire a property manager to handle services such as leasing, maintenance, and upkeep.
If you’re looking for a profitable and hands-off approach to renting, consider taking this route. This is especially important if you decide to rent out several properties. Managing one or two properties is hard enough. Anything beyond that can become a full-time job.
Renting Pros and Cons
Pros
- Possibility of earning passive rental income
- You can move back one day if you want
- Tenants are paying off your mortgage
- Can build your net worth
Cons
- Monthly and unexpected costs can be high
- Bad tenants can be a huge hassle
- No immediate net gain potential
How to Convert a Home Into an Investment Property
If you decide to become a landlord, you must follow a few steps to turn your house into an investment property:
Refinance if you can
If you still owe money on your home, talk to your mortgage lender and decide if refinancing is a good idea. In some cases, refinancing can ease the financial burden of owning two properties.
Update your insurance policy
Talk to your insurance provider before renting. Not all plans cover renters, and you don’t want to be left footing the bill in the event of a catastrophe.
Consult with a property management company
Shop around and get some quotes from property managers. Look for a company that charges a reasonable rate for comprehensive care. Tenant screening services are also a must. By avoiding tenants with bad credit scores, you’ll lower your chances of an eviction.
Prepare the property for renting
Spend some time cleaning and updating the property to get it ready for renters. Set your pricing, draft some property rules (e.g., whether you will allow smoking or pets), and take quality pictures for listing on public sites.
Frequently Asked Questions
When is the best time to sell real estate?
This can vary from location to location. But in general, the best time to sell a house is in either May or June. Check with your real estate agent to see what they recommend for your specific property. Every house and location is different.
Is renting out a house a good investment?
Renting real estate can be immensely profitable, but not in the short term. That’s because, until you’ve paid off your mortgage, the majority of your rental check will go to the lender. Once you have 100 percent equity in your home, the real profits will roll in.
Can a rental property produce tax benefits?
As a landlord, there are many things you can write off on your tax returns. For example, upgrades and repairs are typically tax-deductible. You can also claim credits for depreciation — the loss of your home’s value over time.
The best thing to do is talk with a tax advisor who can best advise you about tax deduction opportunities for rental properties.
What is capital gains tax?
Capital gains tax is a tax that the government places on certain types of assets when they are sold for a profit. If you sell your home for more than $250,000 above your purchase price, you’ll owe capital gains tax.
But there are ways to avoid paying. Again, this is an area where you should absolutely hire a qualified tax advisor or attorney to guide you in the right direction.
The Bottom Line
Trying to decide whether to sell or rent your primary residence can be stressful. The housing market is hard to time, and it’s common to feel pressure to make a move one way or the other.
Think hard before selling or renting, and do what’s best for your personal finance situation and life goals. Talk to a real estate agent, look at your monthly cash flow, and assess the local market.
You can always try renting out your home for a while. If it doesn’t work out, you can sell at that time.
Here’s to finding the right path for you and your family, and to using real estate to build up your net worth.
The post Should I Sell or Rent My House? | Key Considerations appeared first on Millennial Money.
[ad_2]
Source link