Should You Sell Your House or Rent It Out?

When you’re ready to move, figuring out what to do with your house is a big decision. And today, more homeowners are considering renting their home instead of selling it.

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Recent data from Zillow shows about two-thirds (66%) of sellers thought about renting their home before listing, with nearly a third (28%) taking that possibility seriously. Compared to 2021, when fewer than half (47%) of homeowners considered renting before selling, it’s clear this trend is on the rise.

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So, should you sell your house and use the money toward your next home or keep it as a rental to build long-term wealth? Let’s walk through some important questions to help you determine the right path for your financial and lifestyle goals.

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Is Your House a Good Fit for Renting?

Before you decide what to do, it's important to think about if it would make a good rental in the first place. For instance, if you’re moving far away, managing ongoing maintenance could become a major hassle. Other factors to consider are if your neighborhood is ideal for rentals and if your house needs significant repairs before it’s ready for tenants.

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If any of these situations sound familiar, selling might be a more practical choice.

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Are You Ready for the Realities of Being a Landlord?

Managing a rental property involves more than collecting monthly rent. It’s a commitment that can be time-consuming and challenging.

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For example, you may get maintenance calls at all hours of the day or discover damage that needs to be repaired before a new tenant moves in. There’s also the risk of tenants missing payments or breaking their lease, which can add unexpected stress and financial strain. As Redfin notes:

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“Landlords have to fix things like broken pipes, defunct HVAC systems, and structural damage, among other essential repairs. If you don't have a few thousand dollars on hand to take care of these repairs, you could end up in a bind.”

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Do You Understand the Costs?

If you’re considering renting primarily for passive income, remember, there are additional costs you should anticipate. As an article from Bankrate explains:

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Mortgage and Property Taxes: You still need to pay these expenses, even if the rent doesn’t cover all of it.

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Insurance: Landlord insurance typically costs about 25% more than regular home insurance, and it’s necessary to cover damages and injuries.

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Maintenance and Repairs: Plan to spend at least 1% of the home’s value annually, more if the house is older.

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Finding a Tenant: This involves advertising costs and potentially paying for background checks.

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Vacancies: If the property sits empty between tenants, you’ll lose rental income and have to cover the cost of the mortgage until you find a new tenant.

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Management and HOA Fees: A property manager can ease the burden, but typically charges about 10% of the rent. HOA fees are an additional cost too, if applicable.

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Bottom Line

To sum it all up, selling or renting out your home is a personal decision. Let’s connect so you have a pro on your side to help you feel supported and informed as you make your decision.

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