When you’re ready to move, deciding what to do with your house is a big decision. And today, more homeowners are considering renting their home instead of selling it.
Recent data from Zillow shows that 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, this trend is clearly on the rise.
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 critical questions to help you determine the right path for your financial and lifestyle goals.
Is Your House a Good Fit for Renting?
Before you decide what to do, it’s important to consider whether the property 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 whether your neighborhood is ideal for rentals and whether your house needs significant repairs before it’s ready for tenants.
If these situations sound familiar, selling might be a more practical choice.
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.
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:
“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.”
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:
Mortgage and Property Taxes: You still need to pay these expenses, even if the rent doesn’t cover them all.
Insurance: Landlord insurance typically costs about 25% more than regular home insurance, and it’s necessary to cover damages and injuries.
Maintenance and Repairs: Plan to spend at least 1% of the home’s value annually on maintenance and repairs, more if the house is older.
Finding a Tenant involves advertising costs and paying for background checks.
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.
Management and HOA Fees: A property manager can ease the burden but typically charges about 10% of the rent. If applicable, HOA fees are an additional cost.
Bottom Line
To summarize, 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.
