When you're ready to move, deciding what to do with your house can be a significant choice. Nowadays, many homeowners are opting to rent out their homes rather than selling them.

Recent data from Zillow reveals that around 66% of sellers have contemplated renting out their home before putting it on the market, with nearly 28% seriously considering it. This marks a noticeable increase from 2021, when only 47% of homeowners pondered the idea of renting instead of selling.

Should you sell your house and put that money toward your next home, or keep it as a rental to build long-term wealth? Let’s go over some key questions that can help you decide the best option for your financial and lifestyle goals.

Is Your House a Good Fit for Renting?

Before you make a decision, it’s crucial to consider whether your property would be a good rental option. If you’re planning to move far away, handling ongoing maintenance could turn into quite a challenge. Also, think about whether your neighborhood is suitable for rentals and if your house requires major repairs before it’s ready for tenants.

If you can relate to any of these situations, it might be worth considering selling your home.

Are You Ready for the Realities of Being a Landlord?

Managing a rental property isn’t just about collecting rent each month. It requires a commitment that can take a lot of time and come with its share of challenges.

You might find yourself receiving maintenance calls at any time of the day or uncovering damage that needs fixing before a new tenant arrives. There’s also the possibility of tenants failing to make their payments or breaking their lease, which can lead to added stress and financial pressure.

““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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— Redfin

Do You Understand the Costs?

If you're thinking about renting out a property mainly for passive income, keep in mind that there are extra costs you should be prepared for. An article from Bankrate discusses this in detail:

Mortgage and Property Taxes: Mortgage and property taxes are still your responsibility, even if the rent doesn't cover the full amount.

Insurance: Landlord insurance usually runs about 25% higher than standard home insurance. It’s important because it helps cover any damages or injuries that might occur.

Maintenance and Repairs: You should budget about 1% of your home's value each year for maintenance and repairs. If your house is older, you might want to set aside even more.

Finding a Tenant: This involves advertising costs and potentially paying for background checks. Finding a tenant can come with some expenses, like costs for advertising and possibly paying for background checks.

Vacancies: Vacancies can be costly. When a property is empty between tenants, not only do you lose out on rental income, but you'll also need to cover the mortgage payments until you find a new tenant.

Management and HOA Fees: Managing a property can be made simpler with a property manager, though it's important to note that they usually take about 10% of the rent. Additionally, if there's a homeowners association (HOA), those fees will add to your overall expenses as well.

Bottom Line

Selling or renting your home is a personal choice. Let's get in touch so you can have a professional by your side to help you feel supported and well-informed as you make your decision.