Should you sell now or rent your home out?
Keeping your home allows you continue to build equity as you pay down the mortgage with rental income. Plus, the market value of the home continues to increase over time. If the house is in good condition, and you have adequate cash reserves, renting could be a wise decision. As with both scenarios I advise you contact your financial, tax professional and attorney.
Renting can change your home from financial liability to a profitable asset. One formula to use for rent is 1% of a home’s value for monthly rent, or $6000 per month on a home worth $600,000. As a rental owner strike that, as a landlord, you will need to maintain cash on hand to cover maintenance costs and the times when the home is vacant. Most landlords maintain cash reserves of $10,000 to $15,000 per property.
You may want to rent your home if…
- Rentals are in high demand locally
- You want to be a landlord
- The numbers work mortgage +tax+ insurance is covered by the rent.
- You owe more than you can make by selling
- You have a personal attachment to the house or want to save for family
(which maybe hard too if you do not want someone else messing it up)
Keep in mind you need some cash for repairs, and vacancy
Selling Your Home Frees up Cash
Home values increase, on average, between 3.5 and 3.8% every year. A recent forecast by the National Association of Home Builders projected a whopping 14% increase in 2021 alone. We expect to see this more with appreciation falling off in 2023. If you’ve been in your house for more than a year or two, chances are you have created a good amount of equity mind tax rules when considering this. You may need cash to purchase your next home, and there are other good reasons why selling might be better for your current situation.
The most important reason to sell is that you do not want to be a landlord. Managing a rental property requires knowledge of applicable laws, dealing with tenants, maintaining the property, and no shortage of financial issues.
Patience and good manager and people skills. Many of these tasks can be hired out but doing so cuts into potential profits. And they do not care for your home the way you do.
Even if you want to rent there are other reasons it may not work. Maybe you are moving too far away or needs too much work. You don’t have adequate cash on hand to cover vacancies and maintenance
You may want to sell your home if…
- It is a sellers’ market
- You don’t want to be a landlord
- The home needs lots of work before it will be rental ready we have a program to help with repairs for selling – https://www.michelesellsforyou.com/realvitalize.php
- You are moving far away.
Maybe you checked boxes on both lists. Every situation is slightly different, and very personal, think financial, mental, logistics, Your home may be a great place to rent, but if you don’t want to manage it, it is probably better to sell. But if you want to start earning rental income and your home is a good fit for the market, and if you need more help contact me.
Our first house in Santa Cruz