• How to Decide if You Should Rent Your House or List It For Sale •
A new job, growing family, changing lifestyle needs, or a simple desire to live somewhere new are great reasons to consider a new home purchase. But when the time comes to move from your current home to the next. You may find yourself asking, “Should I buy a second home and rent out the first?”
While most homeowners choose to sell their homes when buying a new one, some buy a second home and rent the first one out. Renting your home could create an additional income stream and even help cover your living expenses. On the other hand, selling your home when the market is high can return a more significant, immediate profit — and fewer responsibilities in the future.
So how do you decide — should you sell or rent out your house? Here’s what to ask yourself when determining the best option for your situation:
What Are the Rental Prices Like in Your Area?
Simply put, certain areas are better for renting than others. In some locations, rental prices can easily cover your monthly mortgage payment. Depending on the size of your home loan, the rental income from your property may cover the monthly mortgage payment, as well as additional expenses, such as homeowners insurance and property taxes. However, if projected rent is lower than your monthly mortgage payment, turning your home into a rental may not make sense.
Search rentals in houses that compare to yours in size, amenities, and location. This can give you a good idea of how much you could expect to make in rental income. Also, if you have enough time, pay attention to how long it takes for houses in your area to be rented. If it seems to take long to find consistent, quality tenants, that may be a sign to avoid the rental market altogether.
Do You Need the Equity From Your Current Home?
To help decide if you should buy a second home and rent the first, think about why you are leaving your current home. Have your lifestyle needs changed? Do you need more space? If you are planning to upgrade to a larger or more expensive home, you may need the profit you make from selling your old home to use as a down payment on your new home.
If you can afford the down payment on your new home without any proceeds from the sale of your current home, and if you’re interested in owning a second home or an investment property, then it may make sense to rent out your old home.
Will You Ever Want to Live in the House Again?
Another factor to consider when deciding whether to sell or rent out your home is whether you see yourself ever living in the house again. Perhaps you love your current home but need a bigger one while raising a family. Once your children are grown and have left the house, you may want to keep your old home to later downsize as empty nesters. Or, you may be moving somewhere temporarily for a short-term contract and plan to move back to your current home in a couple of years.
Whatever the reasoning, if you can see yourself ever wanting to live in your home again, renting it out may be the right option. Having reliable tenants will not only provide you with rental income, but it could also help to ensure your home stays in good condition, rather than sitting vacant — with the potential of building equity in two homes in the process.
When Does It Make Sense to Sell?
Passive streams of income can certainly help you achieve your financial goals, but for most people, it simply makes more sense to sell their current home rather than pursuing other avenues, such as turning it into a rental. Here are a few examples of why it’s a good reason to sell your existing home when buying the next one:
- You need the money from the sale to purchase your new home.
- You are in a seller’s market.
- Your home isn’t in a rent-friendly area.
- Local community restrictions prevent you from renting out your home.
- You want to capitalize on the tax benefits from selling your home.
The bottom line is this: deciding whether to buy a second home and rent the first is a personal decision, best made after carefully analyzing your finances, the home’s location, and the home itself. Crunch the numbers and compare them to your goals to decide if selling or renting makes more sense to your situation.
If you would like the help of a trusted expert who always puts your best interest in mind, our team of local Reali Agents is here to help you make an informed decision.
The Bottom Line
About The Author
Portia Green is a highly experienced full-time REALTOR® specializing in the representation of Sellers, heralded by her clients as data-driven and an effective negotiator. Producing $25M total in residential sales volume, Portia's goal is to help her clients achieve the best results when selling their homes and to make their experience an enjoyable one. She has successfully sold real estate since 2008 and has gained an in-depth knowledge of local real estate markets & seasonal trends. Portia has achieved a 100% customer satisfaction rating and wants to share her expertise & personal service with you in the sale of your home. When listing your home with Portia Green and Compass, you'll receive the hands-on service you need and desire. Portia will help you manage the entire process of selling your home from pricing, preparing and staging the house, to marketing, negotiating offers, inspections, all the way to closing. She will recommend skilled vendors for any job needed, personally host Open Houses, and ensure that all showings are accompanied. At Compass, Portia offers a wise no-nonsense way to sell your home for the best price and the least hassle. With a keen eye for staging & preparing listings to maximize Buyer appeal, all of Portia Green's listings are professionally photographed using HDR (High Dynamic Range) photography to provide the highest quality photos in the industry. Professionally printed marketing materials are prepared for all Open Houses. We also capture a 3D scan of your home that creates an interactive walkthrough online along with a custom-designed floor plan and targeted digital marketing campaigns on Google & the most popular social media channels. Compass participates in the Multiple Listing Service, which is the local real estate database of homes listed for sale that all REALTORS® use in helping their Buyers find houses. Your home will appear on every real estate website, in its best light, making a stunning camera-ready debut. Portia Green's home valuation expertise and extensive experience in comparative market analysis will help price your home accurately. She has refined her skills to help you pinpoint which features of your home will result in more showings and better results. Her mantra is for you to be ready to sell your home and feel good about that first. Portia knows that home inspectors always find a problem; that drones take some of the best photos in town; and that her eyebrows will grow to the floor in the time it takes her to read everything that's happening with your HOA, but that doesn't mean she won't do it anyway. Eyebrows be damned. You'll always need a place to unplug, connect, dream, grow, or just be yourself. That makes what Portia does even more meaningful. She’s ready to go the extra mile to help you find just the place. Whether you're selling your very first home, offloading an investment property, or want a vacation getaway with passive income, she is attentive to the details of every home sale. Portia helps busy people navigate this crazy real estate market like a pro, so don't be shy. Every great relationship starts with free advice and a friendly chat. Ask as many questions as you need to. Selling houses is her jam! www.portia.realtor
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