I’m moving! What should I do with my house? Should I sell it or rent it out?
For many people, this is a question they have to answer when they are considering their next move. It can be difficult to make this decision, so here are some pros and cons of each option that you might want to consider before making your final decision.
Why Should I Rent My House?
There are a few reasons you might consider renting out your home. Maybe you don’t want to sell it because you think the local housing market is too low and you can sell it in a few months when the market is better. Perhaps, you are interested in earning extra income each month.
If you are interested in renting out your house, we have put together a complete success guide for first-time landlords that walks through the entire process.
When it comes to renting out your home, the state of the local market is a very important consideration. If the market is healthy, then there is a good chance your house will sell quickly.
However, if the market is low and not showing signs of improvement, then you might be better off renting out your home. By keeping the rental property, you might be able to eventually sell it for more money down the line.
Other things to consider are the local rental demand. If there are a lot of people looking for rental properties in your area, then you can likely charge more for rent. However, if there is not a lot of demand, you might have to lower your price in order to find a tenant.
Capital Gains Tax
If the housing market is doing well, then you will likely have to pay capital gains taxes if you choose to sell. This is a tax on the profits that you make from the sale, and it can be a significant amount of money.
By having a rental property, you can avoid paying capital gains taxes that you would incur if you sold it and generate monthly cash flow instead. So if you don’t need the money from the sale of your house right away, renting it could be a good option.
Rental properties can provide a steady stream of income and monthly profit for you. Rental income is a great way to offset your mortgage payment so you aren’t paying for two mortgages at the same time.
Positive cash flow from your rental property can also be a great way to cover some of your moving costs or to save up for a down payment on your next house.
On top of the monthly cash flow, another benefit of renting out your house is that the mortgage is paid down over time by the tenants’ rent payments. This takes a while, but if you plan to rent it for several years then the equity you gain will be substantial.
These professionals will make sure that the tenants are paying rent and that the house is being cared for while you are gone.
The property manager can help set rental prices, screen potential tenants, and make some repairs as needed. A property manager will also deal with the tenants if any issues come up while you are away.
When renting through a property management company, someone else is responsible for finding tenants and collecting monthly rent. Although property management companies are not essential, they help take the responsibility off you. This can be a great option if you like the idea of generating cash flow but don’t have the time or energy to manage the property yourself.
Are There Risks to Renting My House?
There can be some risks associated with owning a rental property, such as problem tenants and maintenance issues, but if you think about them and plan ahead, your chances of success will be much greater.
If there is significant damage during their stay, or if they don’t pay rent, you may have to go through the hassle of the eviction process.
Unfortunately, tenants may not take care of the property as you would like them to, and they could end up causing damage. If this happens, fixing the damage may end up on your shoulders, and that can be costly.
Shouldn’t My Property Manager Handle the Tenants and Other Issues?
Unfortunately, these companies are not a magic solution that prevents any problem from happening. Although you will likely find a great property management company, they can’t be around all of the time to fix every problem. Even if they do find a great tenant, there might be some issues that come up.
In these cases, you will have to deal with the situation yourself or with the help of your property manager.
It is also important to note that management fees can range from around six percent of the rent to as much as fifteen percent, with the average being ten. So, it is a good idea to thoroughly research the company before committing.
Since you didn’t sell, you won’t pay a capital gains tax, but you will need to pay income taxes on the rental income you earn. These taxes can add up, so make sure you factor them into your budget when deciding whether or not to become a landlord.
Trouble Selling When the Time Comes
Another risk of renting out your house is that you might not be able to sell it when the time comes. This could happen because the condition of the property has diminished over years of being used as a rental, or the housing market could have changed during that time so that there are fewer buyers.
What Are the Benefits of Selling My House?
There are a few reasons why you might want to sell your house. Selling your house can be a great way to get a large sum of money all at once, which can be used as a down payment on a new one. Or maybe you don’t want the responsibility that comes with owning a rental property.
Many homeowners today have the luxury of selling their house in a seller’s market. This means that there are more buyers than homes, and the real estate market is hot. This translates to more offers, higher offers, and fewer contingencies from potential buyers.
When you sell a house, you no longer have to worry about the monthly mortgage payment, property taxes, maintenance expenses, or home insurance. This can be a great relief and could save you money and stress in the long run.
One reason many people sell is that they need the money from the sale of their home right away. Selling your home can provide you with a large lump sum of cash that you can use for whatever you need.
If you sell your home quickly and can get out from under a home loan, you will have the freedom to move wherever you want without worrying about making two mortgage payments at once.
In addition, if housing prices are going up in an area where you’re selling, then you likely will sell your house for more than what you paid, which means you will have made money on the deal.
What Are the Disadvantages of Selling?
There are a few risks associated with selling your house. Some of these include a buyer’s market, fees and commissions, and time before the sale is finalized.
A buyer’s market is when there are more homes on the market than buyers. In these cases, this drives down the prices of homes, and you may have to sell for less than what you paid, known as a capital loss. It could also take longer to sell your house than you would like.
If this happens, you will have to come up with the difference between your underlying loan amount and the sales price on your own. Depending on your personal circumstances, this can be a big financial hit.
Most Sales Take at Least a Month
If you sell your house, it may take some time before the sale is finalized. If you’re in a hurry to move, selling might not be the best option for you.
Fees, Taxes and Other Expenses
When you sell a house, there are some fees that you have to pay, and these costs can add up quickly. Some of these expenses can vary based on the situation, but they are very important to consider in your analysis.
Capital Gains: If you sell your home for more than what you originally paid for it, you will have to pay taxes on the profits that you made.
Commission: If you choose to use real estate agents to sell your home, expect to pay a fee of six percent of the sale price. This means if you sell your house for a higher price, you will have to pay the real estate agent more as well.
Closing Costs: These are fees that you have to pay for when you sell your house. These fees are determined by the sale price of your home and can include commissions, title insurance, transfer taxes, etc.
These can be nearly 10% of your home’s sell price. That means that if you sold your home for $275,000, you could pay around $27,500 in seller expenses.
Can I Avoid Selling Expenses?
When you sell to Momentum Property Solutions you can save up to 10% by not paying agent commissions or closing costs. Simply fill out the form below to get your cash offer!
Should You Sell or Rent?
To sell or rent? This is a question that many people face. It all comes down to your personal financial situation and the current housing market.
Rental income can be a steady cash flow for property owners, however, it requires work to maintain the property and deal with tenants.
If you list your house for sale and the market is good, then it’s likely that your home will sell quickly. You’ll get a lump sum of cash to help pay off debt, invest in other things, or just spend.
Selling your home also comes with fees, taxes, and other costs that you have to pay. You may also experience capital loss, which can cause a financial strain.
In the end, it’s important to weigh all of the pros and cons carefully before choosing the right choice for you and your family.