Do you need a bigger house? Or are you looking to downsize? Whatever the case may be, you’re probably planning to do what most homeowners do – sell one residence and then buy another. But what if you could rent your house out instead of selling? It’s an attractive option that offers numerous benefits.
First Things First: Is it Profitable?
Before going any further, make sure your decision to rent will be a profitable one. In other words, you have to determine whether the income you receive from having a tenant will exceed your expenses. Otherwise, you’ll end up with a headache that costs you money.
When calculating the expenses of your home (as a rental), you have to look beyond the mortgage. In addition to principle and interest on the loan, you also have to think about insurance, repairs, taxes, HOA fees, property management fees, and advertising.
Vacancy also has to be accounted for. As a general rule of thumb, you should anticipate one month of vacancy per calendar year. This safeguards you against extended lulls between tenants.
7 Reasons to Rent Your House (Rather Than Sell)
Assuming the numbers work out, here are some specific reasons why renting your house – rather than selling it – makes sense.
1. Easier Process
Renting your house does require some work, but it’s not nearly as challenging as putting a house on the market to sell.
“Selling a house can be extremely stressful, especially if you can’t find a buyer at the price you want,” Green Residential writes. “Choosing to rent the home instead of selling it can forgo, or at least delay that stress in your life.”
2. You’ve Always Wanted to Invest in Real Estate
Many people dream of one day investing in real estate, but the complexities of finding the right property and saving up enough money for a down payment prevents them from ever doing anything about it. The great thing about renting a house that you already own is that you can get your feet wet without having to jump through a bunch of paperwork. This allows you to jump straight into renting the property and generating cash flow.
3. You Know the Neighborhood
When you rent out a house you’ve lived in, you know the property, the neighborhood, and the neighbors. There are no hidden surprises that will come back to haunt you. This makes it a rather safe investment. (And if you have good relationships with your neighbors, you can get them to keep an eye on the property for you.)
4. You’re Not Emotionally Attached to the House
Renting out a house that used to be your primary residence can be emotionally difficult if there’s a lot of sentimental attachment. Consider your overall level of emotional attachment. If you don’t feel closely connected, renting won’t be an issue.
5. Property Values Are Increasing
Historically, home prices continue to inch up and up. And depending on the city and neighborhood where the house is located, your home value could soar in the coming years. By hanging on to the house, you can choose to sell at a later date and create more equity.
6. Renting Demand Grows
If you believe that a recession is coming in the next couple of years – which most financial analysts do – owning rental property can be highly profitable. The demand for rent usually increases during these periods as fewer people qualify for home purchases. This provides you with a stable market of renters.
7. You Can Always Return
The best part about renting a property is that it always gives you the opportunity to come back and use it as your primary residence in the future.
Many homeowners with young families choose to rent out their starter home so that they can gain more square footage for their kids. Then, when the kids move out of the house and they become empty nesters, they move back into the original house (which is usually paid off).
Putting it All Together
There’s no right or wrong answer for whether you should sell or rent. Some people aren’t cut out to be landlords – even with the protective layer of a property management service. Ultimately, you’ll have to decide what’s best for you in your situation.