Tips On Figuring Out Whether To Sell My Home Or Rent It Out
If you’re struggling to figure out whether to sell your home or rent it out, don’t feel like you’re the only person who has grappled with this decision in the past. Many homeowners ask themselves this exact question.
Like many of the frequently asked questions from home sellers, there is not one magical answer. There are many factors that should come into play when making the decision whether to sell your home or rent it out. It’s important that before you decide which is the best option, that you take into account all factors and take this decision seriously.
Below you will find out some great things to consider when determining whether to sell your home or rent it out. The following considerations will help improve your confidence when making this decision and ultimately will lead to you making the right decision!
Do You Want To Be A Landlord?
The first question you need to ask yourself when determining whether to sell your home or rent it out is whether or not you want to be a landlord. It’s possible that you have no desire to be a landlord so the decision is pretty easy, sell your home.
If you’re not sure what some of the responsibilities and considerations to make are when determining whether you want to be a landlord or not, read on to find out.
Searching For Tenants
One of the biggest responsibilities of a landlord is finding tenants. It’s extremely important that landlords find good tenants though, not just anyone from the streets. A good landlord will be on the lookout for a tenant who has solid credit, a good work history, and one who will take good care of their property. There are certain tips for screening potential tenants that you should be aware of when searching for tenants.
Finding good tenants can take a substantial amount time, but it’s paramount to the success of a rental property. When deciding whether to sell your home or rent it out, make sure you understand the importance of finding good tenants and also the time it can take to find good tenants.
Repairs & Property Maintenance
Another responsibility of a landlord is to make sure that the property is maintained and any necessary repairs are made in a timely fashion. When deciding whether you’d like to be a landlord or not, it’s important to first determine who would be responsible for making repairs and maintenance. If you plan on maintaining the property and making necessary repairs, you need to ask yourself, do you have the time to do so.
For example, in the winter, are you going to have the necessary time to properly winterize the home? There are certain steps and tips for winterizing a home that can take a good amount of time and effort, so decide whether the time required is worth the return.
Being a landlord inevitably comes with the responsibility of dealing with tenant issues. The severity of tenant issues can vary from dealing with a tenant who isn’t respecting the property to having to evict tenants because they haven’t paid the rent.
While deciding whether or not you want to be a landlord, it’s important that you understand that tenant issues can arise. Do you have the time to deal with tenant issues?
There are certain procedures that need to be followed when dealing with tenant issues, otherwise the potential for lawsuits can occur.
Local Real Estate Market Conditions
One factor that should play a huge role in deciding whether to sell your home or rent it out is what the current status of the real estate market is. First and foremost, real estate markets are different and rarely will you find two that are similar. When deciding whether to sell a home or rent it, you need to understand what the local real estate market is like.
The most important question to have answered when reviewing the local real estate market is whether it’s a sellers market or a buyers market. If the local real estate market is a buyers market, it’s possible that selling your home is not the best option because you will likely settle for less money due to the surplus of homes for sale. If the local real estate market is a sellers market, it’s a great opportunity to take advantage of low inventory and a surplus of buyers to secure top dollar for your home.
One of the best real estate statistics to review to help determine whether the local market is a sellers or buyers market is the local market absorption rate. The market absorption rate in real estate is an indicator of the amount of inventory that is currently for sale in a given area.
If the market absorption rate in your local market is 2.0, this means there is only 2 months of homes for sale remaining if no other homes were listed for sale, which is not very many homes. If the market absorption rate is 6.5, this means there is six and a half months of inventory remaining for sale, which is an indicator of a buyers market in most real estate markets. Consulting with a real estate agent about the current state of the market is the best solution when analyzing your local market.
Does It Make Sense Financially
Having rental properties can be very advantageous, assuming the property has a positive cash flow. If you’re deciding whether to rent your home or to sell it, one of the biggest factors to consider when making the decision is to decide which option makes more sense financially. Below are some of the things to consider when deciding if it makes sense to rent your home or whether you should sell it.
Rental Income Tax
When you receive rental income from a property, there are certain things that can be deducted from your taxes. It’s important to weigh out if the rental income deductions are worth the additional income you will show on your taxes.
The most common rental income tax deductions that you’re able to deduct off your taxes include mortgage interest, property taxes, operating expenses, depreciation, and certain repairs. It’s suggested that as you decide whether these deductions are worth it or not that you consult with your accountant to get their take on this.
An experienced accountant will be able to explain the tax deductions for rental homes in detail so that you are able to make an educated decision if they are worth it.
Capital Gain Tax
Depending on the amount of equity you have in your home will determine whether you’re subject to capital gain taxes or not. Understanding the real estate capital gain tax rules is very important so that you can decide whether selling or renting your home makes more sense.
For example, if it looks like you’ll be subject to paying capital gain taxes on the sale of your home, it may make more sense to keep the home as an investment and rent it out.
Another huge factor to consider whether to sell your home or rent it out is the amount of equity you have. If you only have a few thousand dollars in equity, you may want to consider renting your home out until you can have enough equity to cover the costs of selling a home.
It’s also a smart idea to evaluate the rate that your home is building equity before deciding whether to sell your home or rent it. If the home is appreciating at a quick rate, it’s a good idea to hang onto the home as long as the appreciation continues to remain steady.
Selling a home that is building equity at a fast rate is not suggested, if you’re able to cover the costs of owning the property while it’s being rented.
As mentioned above, repairs and maintenance are to be expected when you own a rental property. It’s critical that when you’re deciding whether it makes financial sense to sell your home or to rent it out that you consider the expenses.
Repair and maintenance expenses are important to keep in mind but there are other expenses of owning a rental property. Other important expenses to keep in mind include insurance, potential legal fees, property management (if you’re not going to be the landlord), real estate taxes, and mortgage interest.
So if you’re asking yourself, should I sell my home or rent it out, as you can see there are many considerations that you need to be aware of. Owning rental property is not for everyone and it’s critical that before you decide to rent out your home that you realize what is involved.
It’s possible that renting out your home is a much better option than selling it. If you’re struggling to decide which is the best option for you, the above information should help you make the best decision for your scenario.
Other Top Resources On Renting A Home Or Selling It
- Should You Rent or Sell Your Home via Debbie Drummond
- Tips on Rental Real Estate Income, Deductions, and Recordkeeping via IRS.org
- The Complete Guide To Becoming A Landlord via Investopedia
Are you struggling with the decision whether you should sell your Rochester NY home or rent it? If so, the above tips for deciding whether to sell my home or rent it out should help provide some clarity. If you’re still unsure which is the best, contact me, and I’d love to discuss your options and help you weigh the PROs and CONs of both.
About the authors: The above article “Should I Sell My Home Or Rent It Out?” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
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