16 Dec 2015
Should You Rent or Sell Your Home? Homeowner’s Guide

Should You Rent or Sell Your Home? Homeowner’s Guide

Should You Rent or Sell Your Home? Homeowner’s Guide
0 comments
Guid,Tips,Selling,Auction real estate agents

Are you deciding between renting or selling your home? There many important factors you should consider when making this decision. This article will consider the pros and cons of selling and renting out your home.

Money matters

Owning two properties at once comes with a financial risk. It is important to consider whether the rent you can charge will be enough to cover your mortgage, or you will still have to make payments toward it. Additionally, there is always a possibility that you will have months without rental income between tenants. Consider whether you can afford several months without a tenant.

Tip: If you were going to rent out your property, I would recommend you consider landlord insurance.

Another way to determine the financial viability of selling versus leasing your house is to determine the capitalisation rate using this rent or sell calculator from Forbes. It divides the net operating income from renting your house by the potential sale price to determine which path is best.

The condition of your home

Homeowners often renovate before selling to increase the sale price and ease of sale. If your home needs updates that you can make yourself on a relatively small budget, then selling is a good option. If, however, your home needs major renovations that will eat away at any potential profits, you could consider renting to provide yourself more financial security during your move.

Future housing plans

Before you sell, consider if your move is permanent. If you are moving out of the city or state without any intention of moving back, selling your house will likely be the way to go. If you are travelling or temporary away to work, it might make more sense to rent out your home while you are away. 

Note: Listing your house for rent enables you to avoid paying settlement fees you would otherwise pay for the sale.

Your current housing market

The state of your market greatly contributes to the valuation of your property. If the housing market in your city is “cold,” it might be a great opportunity to sell if you were to upgrade. In a “cold” market, it is a great opportunity to find a bargain. Usually higher priced neighborhoods take a larger hit in cold markets, which provides you an opportunity to capitalise.

Seller’s markets, or “hot” markets, create competition and can help drive up housing prices. Not sure if you live in a hot or cold market? Check out these suburb profiles.

It is helpful to weigh all the pros and cons before making a major decision, especially one that will impact your finances for years to come. Here are some points to help you through the decision-making process:

Selling your home

Pros:

  • Money: You will get money from selling that can be used toward the purchase of a new home. Depending on how much equity you have accumulated in your current house, this can greatly reduce the amount of your new mortgage.
  • Moving: If you are moving to a different suburb, you will not have to worry about the upkeep and rent collection from your current home.
  • Upgrade: When you sell, you have an opportunity to buy back into the market at its lowest. It is difficult to predict property trends. The current outlook expects a further drop.

Cons:

  • Reducing assets: If you sell your home, you are removing yourself from the market. This is true if you go from home ownership to renting.

Renting out your home

Pros:

  • Tax advantages: Landlords can take advantage of tax deductions on their rental properties. Any maintenance, utilities not paid by the tenant, mortgage interest, and property insurance can be claimed.
  • Diversification: For couples who are unsure of their retirement plans or who are not emotionally ready to sell their family homes, renting out their houses while downsizing to a townhouse can be a smart financial investment. It will allow them to hold on to their original home should they decide to return permanently or for part of the year.

Cons:

  • Distance: If you are moving far away, renting out your house instead of selling may be a bad idea. Managing your rental property can be difficult and stressful, especially when done from afar. Even though it can cost between 10 and 15 percent of the rent, you should consider hiring a property management company to put your mind at ease
  • Rates: While you still own the property, you will have to rates. Depending on your suburb, these rates can vary. Make sure to account for these additional fees.
  • Rent collection: If your tenants are late or miss a rent payment, this can cause cash flow issues for you. Similarly, if your tenant gives notice, and you are unable to find a tenant by the following month, you could abruptly lose your rental income.
  • Damage: Any time you entrust your home to renters, there is potential for damages that might affect the home’s resale value in the future.

There are many key factors to consider when deciding whether to sell or rent your current home. To feel confident in your decision, it is important to determine the current housing market, your personal finances and the permanence of your move. 

Written by Naked Writers

Should You Rent or Sell Your Home? Homeowner’s Guide
Naked Writers

Naked Real Estate Writers collaborating to bring the latest news and trends in real estate for buying, selling and working in the exciting world of real estate. Is it time for you to get Naked?

View all posts by : Naked Writers

Leave a reply

Your email address will not be published. Required fields are marked *

* required fields

Related Posts

7 Common Mistakes That Landlords Make

7 Common Mistakes That Landlords Make

How to Become A Real Estate Agent: The Ultimate Guide

How to Become A Real Estate Agent: The Ultimate Guide

How To Choose The Best Real Estate Agent

How To Choose The Best Real Estate Agent

Need some help right now?

Please fill out the form below with any questions you have. We will get back to you promptly.

8 + 18 =