Renters Warehouse Blog
Putting an End to the Question “Should I Rent or Sell?”
For most people, there comes a point in life when it’s time to move –whether you’re in need of a bigger, or smaller house –or you’re leaving town for another job, You’ll ask yourself – “Should I rent or sell?”
No matter what your reason for relocating, one of the biggest questions that will usually arise, is the decision of what to do with the current home. For many people, the first thing that comes to mind is to sell it and move on, but what if there were a better way?
Many people are finding that instead of selling, keeping their home as Rent Estate™ –and renting it out for monthly income, is an excellent alternative to selling. While selling offers a number of advantages, and is indeed ideal for some situations, much of the time, renting can work out to make more financial sense in the long run.
If you’re curious about whether to rent or sell your property, here’s a look at a few questions that you should ask that will help you to discover which option is best for your circumstances.
“What’s my financial situation like?”
While the best answer to the question whether to rent or sell often comes down to personal preferences, there are a few facts that help to make the decision a bit easier. One of the main considerations is your financial situation. Sure, you may have been planning to sell the house and putting the money into a new one, but keep in mind that selling your home is a one-time transaction. It doesn’t provide recurring revenue monthly like renting does. Additionally, taking out a mortgage for your new property, gives you leverage –or access to the banks’ money, for a relatively small down payment. Owning a rental property in addition to your primary residence means that you’ll own two significant assets, which will give you a hedge against inflation, and, hopefully, long-term appreciation. Rent Estate is an excellent long-term asset and a great option if you’re looking to diversify your investment portfolio.
“Would renting or selling be the most profitable option?”
Currently, demand for rentals is booming. Almost 40 percent of the nation is renting, and this percentage is projected to grow. According to the Urban Institute, 59 percent of new households in the next 15 years are expected to be comprised of renters. While selling does give you a large, sudden influx of cash, in many cases, you’ll be subjected to capital gains tax –which means that the profits from the sale won’t always be completely in-pocket. Additionally, you’ll have to deal with closing costs, and it’s not uncommon for Realtor fees to be at around 6 percent of the sale. Also, selling carries its own set of risks –what if you sell at a down point in the market, and are forced to accept bottom dollar for your property? Renting allows you to ride out the down market, allowing you to postpone the sale until the housing market recovers. Additionally, if you’re hoping to get the best price for your property, renting allows you to have time to do those often much-needed repairs, getting your property into a great shape so you can command a higher asking price for it. In short, renting can be a great alternative, and it’s one that we personally stand behind.
“Do I plan to return to the area again someday?”
Another thing to keep in mind is whether you plan to return to the area again someday. If you own property in a place where you have family and friends, hanging onto your property and renting it out while you’re away might make good financial sense. As we’ve seen, if you sell, you’ll have to pay closing costs, Realtor fees, and potentially capital gains tax –expenses that you could have saved yourself if you choose to rent your home. Additionally, when you return to the area, you’ll have to go through the hassle of locating a home, and the buying process all over again –plus, housing prices will most likely have gone up by that time. Renting, on the other hand, allows you to use your home to generate monthly income while allowing you hang onto your valuable asset that will be waiting for you when you return. Another option that works well for some people, is to hold onto the home and use it as a vacation rental. If you occupy the property for fewer than 15 days per year or less than 10 percent of the total rental days –whichever one is greater, you’ll be able to maximize your tax deductions on the rental.
“Do I have what it takes to be a landlord?”
Finally, often the decision to rent or sell comes down to your individual preferences and propensity towards being a landlord. However, you’ll want to note that this isn’t as complicated as you might think. When many people think of landlords, an image of a handyman in coveralls comes to mind, and they envision weekends spent down at the rental doing maintenance and repairs. But the fact is that you can be a landlord, without having to directly manage the day-to-day happenings at your rental. Many landlords choose to hire a professional property management company to take over for them. While this will cost, usually a small percentage of the rent each month, many landlords find that a good property manager is worth their weight in gold. The money that you spend on property management can usually be easily recovered in the rental income.
So what’s the short answer? To rent or to sell? While the decision is up to you, it’s important to be well-informed. Don’t just assume that you should sell your home; instead, take the time to weigh up the pros and cons carefully, first. Run the numbers, do a careful profit and loss analysis, and consider whether owning Rent Estate is something that you’re interested in. Then make your choice with these facts in mind.
We’ll close with one final piece of advice: beware of knee-jerk reactions, and making huge, one-time decisions for something that’s as monumental as selling your home. The majority landlords will tell you that Rent Estate is a vital tool, and one that’s helping them to achieve financial independence, so consider the opportunity that you have to start generating a passive income with your property, before making your final choice.
If you’re interested in joining the millions of Americans who are taking advantage of Rent Estate –be sure to download your copy of the Rent Vs. Sell Handbook. While you’re at it, take advantage of our Free Rental Price Analysis (FRPA), and see how much you could be getting for your home each month.
Photo Credit: Life of Pix