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Should you sell your house or rent it out?
What’s the best way to make money in a difficult housing market?
Depending on where you live, you might find yourself in a difficult housing market — interest rates are fluctuating, and the extreme COVID-era seller’s market seems to have passed.
So if you’re thinking about moving — due to a new job in a new town, a growing family, or just new wants or needs for your living space — you might not know what to do with your current home.
Should you sell your house or rent out your home? What are the pros and cons of selling your house right away, vs. carrying your current property until the market gets better? What are the costs and benefits of becoming a landlord?
Since real estate can be both complicated and expensive, we know there isn’t an easy answer to this question. That’s why we asked three real-estate experts for their advice:
- Nicole Beauchamp, Senior Global Real Estate Advisor and Licensed Associate Real Estate Broker at Engel & Völkers
- Stacy Brown, Director of Technical Training at Real Property Management, a Neighborly company
- Adie Kriegstein, Licensed Real Estate Salesperson and founder of the NYC Experience Team at Compass
Here are the three questions they suggest asking before you decide to sell your current home or rent it out, and how you can use your answers to make an informed decision.
In this article:
What is the housing market like in your area?
What’s the first step in deciding whether to sell your house or rent it out? Reviewing the local housing market—for both sales and rentals.
“I would research what the rental market is like and what the projected rent could be,” advises Beauchamp. “Weigh all of the costs and expenses of keeping your house as an investment against the costs of selling. A lot of it depends on the area where you live.”
Kriegstein agrees. “If you’re in a buyer’s market, it will be difficult for sellers to not only move their property but to also make money from the sale,” she explains. “It’s also important to examine the current rental market trends in one’s area, as those can also vary—and you wouldn’t want the home sitting vacant on the market as you would financially be carrying it.”
“It’s very important to consider the potential vacancy periods,” Beauchamp says, “and plan for the worst-case scenario.”
Then again, the market in your area could set you up for a best-case scenario. “Homes near a neighborhood hot spot, whether that be schools, shopping or experiences, may be excellent properties to rent out,” says Brown. “As mortgage rates continue to be high across much of the U.S., first-time buyers may seek a rental property rather than purchasing a home, and if they can find a property that checks all the boxes, this is a bonus.”
Where do you plan to live next—and will you be buying or renting?
Whether you sell your house or rent it out, you’re going to need somewhere to live—and your next home could play an important role in your decision to sell or rent your current property.
“If you are renting out your former home and living in another home you’ve purchased,” advises Brown, “ask yourself what you might do if your renter moves out or stops paying rent. Can you cover two monthly mortgage payments as well as utility costs for both properties?”
Beauchamp agrees. “Consider the costs of continuing to carry your current home, particularly if you are going to be living far away from the property.” The further you live from a house you’re renting out, the more work you’ll have to do to keep up with your tenants’ needs and concerns—whether you cover the distance yourself or hire a property manager to help you. In addition to maintenance costs, property taxes are also a consideration.
If your current house is paid off in full, the decision becomes easier. “If the home you are renting is paid off, this can be managed easier as there is no monthly house payment due, and if renter issues occur, they are more easily handled,” says Brown. “Property management companies can help ensure the property is rent-ready, paperwork is properly filled out and strong rent-ready candidates are in the pipeline to move into the rental property.”
On the other hand, people who decide to rent a new home while renting out their old one could find themselves stuck in a kind of housing limbo.
“Rental properties are revenue drivers,” Brown explains—and while your tenants may drive some revenue in your direction, you’ll also be generating revenue for the person who owns the property you’re renting. If the market makes it difficult for you to buy a new home and you end up renting for longer than you were anticipating, much of what you earn as a landlord could go straight into someone else’s pocket.
What are your long-term goals?
What’s the last question you should ask yourself before you decide to sell your home or rent it out? Whether the short-term plan fits with your long-term goals.
“Whether renting out your current house is a good idea depends on your individual circumstances and financial goals,” explains Kriegstein. “Renting can be a good idea if the rental income covers your expenses and the market conditions are favorable. However, one must also keep in mind potential maintenance repairs, property management costs and market rental regulations as they can vary state to state.”
Beauchamp agrees. “When considering the role that real estate plays in creating wealth, I would always advise clients to consider the long-term horizon, not just the short-term shift.” If you want to maintain multiple properties as a way of generating generational wealth, for example, renting out a house you’re not currently using could allow you to retain equity and build long-term stability.
On the other hand, becoming a landlord is time-consuming—and maintaining a rental property can be more expensive than people realize. If you can’t afford the costs of renting out your current home, it might be better to sell the property and build wealth in other ways.
“Ultimately, renting a property out will depend on the current market and the comfortability of the current homeowners stepping into the role of a landlord,” says Brown. “Consulting a property management company with experience in wealth management can help homeowners understand the current trends of the market and the potential growth of the property they are looking to rent.”
About Nicole Dieker
Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.Read more by Nicole Dieker
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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