Rent vs Sell, once you’ve decided to dispose of your present dwelling, it only remains to choose whether the property should be sold outright or rented out to a tenant, so you have a continuing source of income. The avenue that you choose will depend on several factors, the first of which is whether you want to receive a lump sum of cash for the residence, or whether you’re willing to accept much smaller monthly rental payments for a longer period of time.
If one or the other of these is more appealing to you, then the other factors involved may not matter. However, if you’re not committed one way or the other about payments, then you should consider the other factors which come into play when you’re considering renting vs. selling your house.
Your tolerance for being a landlord
Do you have any do-it-yourself type skills which you may have acquired during your home ownership years? Do you enjoy doing this kind of work? Will you get burned out on doing repairs and normal maintenance if you’re faced with doing it frequently? These are questions you need to ask yourself, to determine whether you have the right temperament to rent out your property and act as landlord.
Tax deductions
Rent vs Sell, By renting your house out to a tenant, you’ll be entitled to depreciate the house at an annual rate. This rate can be calculated by totaling the cost of the house, plus any major improvements you made, and then dividing that total by the standard depreciation rate, which is 27.5. You’ll also be entitled to deduct property fees and the cost of major repairs if you decide to rent the building out.
Local housing market
Before you make any move at all with your house, you should do some research into the local housing market. You should be aware of how many people are actually looking for housing in your area, and how many are buying vs. renting. When there is a very low number of one or the other, it would make good sense to dispose of your house using a method which caters to the most prevalent group.
Future plans
Now is a good time to consider what your future plans will be for a place to live. Do you intend to move back in to your home at some point, or have you already decided that you will rent or buy another home altogether to live in? If you sell your home, you will lose the chance to re-occupy the dwelling in the future, whereas renting it out will still give you an opportunity to live in the same house at some point.
Can you afford to own multiple properties?
If you were to buy another home for yourself to move into, can you afford to own two or more properties at once? Experts recommend having somewhere between three and six months of cash reserves to manage each property you own, so that you won’t be drastically impacted if your source of income is suddenly cutoff for any length of time. Think about what you would have to do, if your rental home produced no income for several months at a time, and whether you could survive that kind of scenario.