If you’re ready to move to a different city or a new house, you’ll inevitably consider selling your current home. But selling it isn’t the only option; obviously you don’t want it sitting empty, especially if you’re still making mortgage payments, but you do have the option of renting it as you get settled in a new location.
The Advantages of Renting
Renting your property, instead of selling it, comes with a few important advantages:
- Ongoing income. Instead of receiving a lump payment for your house, you’ll instead get the benefits of a monthly rent check. Assuming you’re charging more in rent than you’re paying in ongoing expenses, that means you’ll make a profit, sometimes several hundred dollars a month or more. Plus, you can always sell the property in the future.
- Property retention. If you see your current house as a fantastic long-term investment, or if you have a sentimental attachment to the home, this option allows you to retain ownership of the property without it sitting empty. For example, if this is a home in a high-growth neighborhood, but you’re interested in moving to another location, this allows you to capitalize on that potential growth without abandoning your moving plans.
- No selling stress. Selling a house can be extremely stressful, especially if you can’t find a buyer at the price you want. Choosing to rent the home instead of selling it can forgo, or at least delay that stress in your life.
The Disadvantages of Renting
However, there are also some disadvantages to this arrangement:
- No immediate cash influx. Many homeowners sell their home so they can have access to the cash necessary to make a down payment on their next home. If you don’t have the cash reserves to do this on your own, this could be crippling. Rental income can bring you a profit gradually over time, but it won’t bring you the sudden, significant cash necessary to fund your next home purchase.
- Tenant screening. If you want to rent your property successfully, you’ll need to find a reliable tenant—that means someone interested in your property who has a significant, stable income and an extended job history, as well as plenty of references to back them up. The tenant screening process can sometimes be long and difficult, compromising the effectiveness of your renting strategy and adding more stress to your life.
- Landlord responsibilities. As a landlord, you’ll have lots of responsibilities. You’ll need to maintain and repair the property as needed, collect rent from tenants, and in some cases, file for an eviction if your tenant is problematic. Not all people are cut out for this, especially if you’re trying to start a new life in a new city. There are ways around this, of course—you could always hire a property management firm—but you’ll still be responsible for making sure the property is properly cared for.
Factors to Consider
If you’re not sure whether you should rent your property or simply sell it, consider these important factors:
- Neighborhood dynamics. The dynamics of your neighborhood may make your property better suited for sale or rent. For example, if half the homes in your neighborhood are occupied by homeowners and the other half are occupied by renters, you’ll fit right in by renting yours. However, if you own a big home in a well-off neighborhood where nearly all occupants are owners, you’ll have difficulty finding appropriate tenants.
- Going rent prices in the neighborhood. It’s also important to pay attention to the typical rent prices for a property like yours in this neighborhood. You’ll need to charge monthly rent in an amount that’s competitive with similar properties or units. In some cases, that means an amount equal to or lower than your monthly expenses. If that’s the case, it may not be worth renting your property. Ideally, you’ll be able to charge a fair price that’s still in excess of your monthly expenses—and make sure you’re incorporating the costs of routine maintenance and unpredictable repairs into your cost estimates.
- Physical proximity to the property. If you plan on tending to the property yourself, you’ll want to consider your physical proximity to that property. Occasionally, you’ll be tasked with things like yard work, simple maintenance items, and inspections. If you live in a nearby town, this isn’t a big deal, but if you live across the country, it becomes exceedingly difficult to manage. In general, the closer you are, the easier it’s going to be.
- Emotional or financial attachment to the property. Consider your personal attachment to the property as well. Some people like the idea of renting the property so they can hold onto it, and possibly make it available to their children when they grow up, or move back into it eventually. Others want to retain ownership of the property because they believe it will significantly appreciate in the near or distant future. But if you have no attachment to the property, these factors won’t matter to you.
- Personal financial stability. How much cash do you have available for the down payment of your next house? If you’re depending on an influx of cash to help you with your next purchase, renting may not be a viable option. But if you can save a down payment independently, renting may be a more promising opportunity.
- Property management options. As a landlord, working with a property manager will make everything easier. They’ll handle tenant screening, rent collection, basic maintenance, evictions, and more. Accordingly, if there’s a good property management firm in your area, you may be more inclined to rent your property.
Whether you’re getting ready to sell your property or you’re interested in renting it to a prospective tenant, Green Residential can help. We have the real estate agents and expertise you need to sell your home quickly, and the property management services that can make your duties as a landlord much simpler. Contact us today to learn more about how we can serve your needs!