When you're preparing to move, deciding what to do with your current house is a significant choice. You might be weighing whether to sell it and utilize the funds for your next journey, or retain it as a rental property to establish lasting financial security.

Many homeowners often find themselves pondering this dilemma: should you rent out your property or not? The decision can be complex, with factors like rental income potential and landlord duties weighing heavily in the equation.

Let's review some important questions to consider to assist you in making the optimal decision for your specific circumstances.

Is Your House a Good Fit for Renting?

Considering becoming a landlord? Your current home may not be the best choice for renting out. Perhaps you are relocating far away, making it inconvenient to manage maintenance. It could be that the neighborhood isn't rental-friendly, or the property requires substantial repairs before it can be leased out.

If any of this resonates with you, selling could be the ideal choice for your situation.

Are You Ready for the Realities of Being a Landlord?

Managing a rental property involves more than just receiving rent payments; it is a demanding and occasionally difficult responsibility.

Being a landlord comes with its fair share of challenges. You might receive maintenance requests from tenants at any time of the day. Sometimes, a tenant might cause damage that needs fixing before the next lease begins. Additionally, you might encounter situations where tenants fall behind on payments or break their lease early. According to Investopedia, these are common issues that landlords face regularly.

“It isn’t difficult to find horror stories of landlords troubled with more headaches than profits. Before deciding to rent, consider talking to other landlords and doing a detailed cost analysis. You might find that selling your home is a better financial decision and less stressful.”
— Investopedia

Do You Have a Good Understanding of What It’ll Cost?

If you're considering renting out your home to increase your income, keep in mind that there are extra expenses you should account for. According to an article on Bankrate, you'll need to plan for these additional costs.

  • Mortgage and Property Taxes: You're still responsible for paying these costs, even if the rent doesn't fully cover them.

  • Insurance: Landlord insurance typically runs around 25% higher than standard home insurance but is essential for protecting against damages and injuries.

  • Maintenance and Repairs: To ensure proper maintenance, consider budgeting at least 1% of your home's value each year, and possibly more if your home is older.

  • Finding a Tenant: In this scenario, you'll need to cover advertising expenses and possibly cover the costs of background screenings.

  • Vacancies: If the property remains vacant between tenants, you will experience a loss of rental income.

  • Management and HOA Fees: A property manager can help lighten your load, but usually charges around 10% of the rent. Keep in mind that there may be additional HOA fees to consider, if they apply to your property.

Bottom Line

Selling or renting out your home is a personal decision that depends on your circumstances. Taking the time to evaluate your options will help you make the best choice for your future.