Deciding what to do when you plan to move can be a major decision. You might be torn between selling your home to use the money for your next adventure or renting it out to build long-term wealth.
This is a question many homeowners face, and the answer is not always clear. If you’re curious about rental income or worried about the responsibilities of being a landlord, there are many factors to consider.
To make the best decision for your situation, let’s look at some important questions.
Is this home suitable for renting out?
Even if you’re interested in becoming a landlord, your current home may not be ideal for renting. For example, moving far away can make ongoing maintenance inconvenient, the neighborhood might not be suitable for renting, or the home might need significant repairs before it can be rented.
If these conditions apply, selling the house might be the best choice.
Are you ready to handle the realities of being a landlord?
Managing a rental property involves more than just collecting rent. It requires significant time and effort.
For instance, you might receive maintenance requests from tenants at any time, and tenants could cause damage that needs repairing before the next lease begins. You also need to handle situations where tenants delay payments or terminate the lease early. According to Investopedia, it’s not hard to find horror stories where the hardships of being a landlord outweigh the benefits. Before deciding to rent, talk to other landlords and consider a detailed cost analysis. Selling the house might be a financially better decision and less stressful.
Do you understand the costs related to maintenance?
If you’re thinking of renting out your home primarily to earn extra income, remember there are additional costs to plan for. These typically include:
• Mortgage and property taxes: Even if the rent doesn’t cover them fully, you still need to pay these costs.
• Insurance: Landlord insurance is about 25% more expensive than regular home insurance and is necessary to cover damage and liability.
• Maintenance and repairs: Expect to spend at least 1% of the home’s value annually, potentially more for older homes.
• Finding tenants: This may involve advertising costs and fees for background checks.
• Vacancies: You’ll lose rental income during periods between tenants.
• Management and HOA fees: Property managers can ease your burden but usually charge about 10% of the rent. HOA fees can also add to your costs.
Conclusion
In summary, whether to sell or rent your home depends on your individual circumstances. Whatever you decide, take the time to carefully evaluate your options to make the best choice for your future.
Weigh the pros and cons carefully and consult with experts for support and information. Real estate agents can be a great resource for advice.
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