Should You Sell or Rent Out Your Home?

When it’s time to move, one of the biggest decisions you’ll face is what to do with your current home. Increasingly, homeowners are considering renting their homes instead of selling. A recent study from Zillow shows that 66% of sellers thought about renting their property before listing it, with 28% seriously considering it. That’s up from just 47% in 2021.

So, the question is: should you sell your home and use the proceeds to purchase your next one, or should you keep it as a rental property and build long-term wealth? Let's explore some key considerations to help you decide what’s right for you.

Is Your Home a Good Fit for Renting?

Before making a decision, it's important to assess whether your home would work well as a rental property. Some things to consider:

• Distance from your current home: If you're moving far away, managing the property could become challenging. You'll need to think about how you’ll handle maintenance and tenant issues remotely.
• Neighborhood: Is your area in demand for renters? A desirable location can make a big difference in attracting quality tenants.
• Condition of the home: If your property needs major repairs or updates, it might be easier (and more profitable) to sell instead of investing in fixes for renters.

If any of these concerns apply, selling could be a more practical option.

Are You Ready to Be a Landlord?

Owning rental property comes with responsibilities beyond just collecting rent checks. Are you prepared for the reality of being a landlord?

• Maintenance calls: Whether it's a broken pipe or a malfunctioning HVAC system, as a landlord, you’ll be responsible for handling these issues, often at inconvenient times.
• Tenant challenges: There’s always a risk of late rent payments, broken leases, or even difficult tenants. It’s important to be prepared for these unexpected situations.
• Financial responsibilities: As Redfin points out, landlords must be ready to handle big repairs, which can cost thousands of dollars. Having a reserve fund for these expenses is crucial.

Being a landlord requires both time and energy, so you’ll need to decide if you’re prepared for these challenges.

Do You Understand the Costs of Renting?

Renting your home out for passive income can sound appealing, but it comes with extra costs. Here are some things to keep in mind:

• Mortgage and Property Taxes: You’ll still be responsible for paying your mortgage and taxes, even if the rent doesn’t cover these expenses entirely.
• Landlord Insurance: This is typically 25% more expensive than regular home insurance and is essential to cover damages and liabilities.
• Maintenance and Repairs: Expect to spend about 1% of the property’s value each year on maintenance, and more if the house is older.
• Finding Tenants: Advertising for tenants, screening them, and possibly paying for background checks can add to your expenses.
• Vacancies: If your home is vacant between tenants, you’ll lose rental income and may have to cover the mortgage costs until a new tenant moves in.
• Management and HOA Fees: Hiring a property manager can take some of the load off your shoulders but will typically cost 10% of the rent. HOA fees may also apply, depending on your location.

Bottom Line

Deciding whether to sell or rent your home is a personal choice and depends on your financial goals and lifestyle preferences. Whether you decide to sell for the immediate financial gain or rent for long-term wealth, it’s important to make an informed decision.

If you’re unsure about what’s best for you, let's connect. The Padernacht Real Estate Team is here to help guide you through the process and make sure you’re fully supported as you move forward. Reach out today to discuss your options and get expert advice tailored to your situation.