Deciding whether to sell your home or rent it out can be quite challenging. Both options have pros and cons, and determining the correct choice depends on financial goals and long-term plans. Let’s examine the most important factors that will help you make the best decision.
When Selling Your Home is the Right Choice
You Need Cash for a New Home
If you are willing to invest in a new house, you will likely also require the funds raised from the house at present. The equity of your house would be freed up for you by selling it. You would be generating this by way of down payment for your next house.
You Don’t Want to Be a Landlord
Managing a rental property is hard. Selling is a good idea if you do not want the headache of tenants, necessary repairs, and maintenance. You won’t have to manage a rental.
You Stand to Make a Significant Profit
Home prices in many areas are increasing. If you’ve owned your home for a long time, you may be able to sell at a tremendous profit. Check out other comparable sales in your area to see if it’s time to sell.
You’re Eligible for Capital Gains Tax Exemption
If you have lived in your home for two of the last five years, you may be eligible for tax exclusions. You can exclude as much as $250,000 in the case of single persons (or $500,000 in the case of married couples) from your income.
When Renting Your Home Makes Sense
Your Move Is Temporary
If you are moving temporarily and will be coming back, renting the place may work for you. That way, you’ll have a place to return to without buying and selling again.
You Want Rental Income
Rental income can be stable. If the rent covers your mortgage and expenses, you’ll earn extra money monthly.
High Rental Demand in Your Area
If you live in a region with high rental demand, renting will work for you. If tenants are in demand, renting is less cumbersome. Watch out for the local market and see if renting would be a great step.
You Expect Property Value to Rise
If you think your house will appreciate within a few years, you can consider renting it out now and selling it later. You would be earning rental income until the market increases.
Costs to Consider: Renting vs. Selling
Renting out your home or selling it outright incurs costs. Well, let’s analyze how things stand for both:
Costs of Renting Out Your Home
Mortgage
Even with rental income, you will still have to make your mortgage payments. Ensure that the rent covers the mortgage and other expenses.
Insurance
You will require landlord insurance. It tends to be 25% more than standard homeowners insurance.
Maintenance & Repairs
You’ll have to maintain the property. Budget at least 1% of the home’s value per year for upkeep.
Tenant Search & Vacancy Costs
Identifying tenants is a gradual process. Depending on the tactic, advertising and screening expenses may be involved. Periods of vacancy also result in lost rental income.
Property Management Fees
Using an agency can make things easier but will add agency commission at about 10% of the rent per month.
Costs of Selling Your Home
Agent Commissions
In general, real estate agents charge a commission between 5% and 6% of the sale value. For a $400,000 house, that comes to around $20,000.
Home Improvements
You’ll likely need to repair or upgrade your property to get a buyer, which might include cleaning, landscaping, or staging.
Closing Costs
Then there are various closing costs: title insurance, transfer taxes, attorneys for your state and theirs, and the list goes on.
Mortgage Payoff
If you have a mortgage, you will use some of the sale proceeds to pay off this loan if you still owe it.
What About a Recession?
Economic insecurity may also be affecting your pocket. If you are expecting income from tenants, then you might face fluctuations in the tenant market, much like a recession, which might see property prices plummeting. You should weigh your job security and your financial condition regarding this decision.
Bottom Line: Sell or Rent?
It’s all about your financial condition when you want to sell or rent a property. So, let’s summarize things:
- Sell if you must raise cash for a down payment, don’t want to become a landlord, or you can make a lot of money.
- Rent if your move is going to be brief, you need to make rental income, or you feel your investment’s value will rise.
Do you need professional help? Our team at North Fort Myers Realty ONE Group MVP, can assist you. Whether you’re a buyer, seller, or tenant, MVP Realty Fort Myers is just the right backup for you.
