You love your home. You’ve probably put a lot of time, work, and money into it. But now it’s time to move on. Maybe you outgrew your home, need to relocate, or found a better property — whatever the case, you’re wondering what to do with this property.
The most obvious answer is to sell your home, right? You can’t live in two places at once and you might still have a mortgage on the first property. Selling your home means an instant lump sum of cash. No stressing out about two properties and no complicated taxes at the end of the year.
But you have another option: renting out your house. With renting, you could establish a stream of steady passive income, and your home will likely appreciate should you want to sell in the future.
So, how do you know if renting or selling is the right choice? We’ve broken it down for you in this article. Let’s start with a look at reasons to rent out your home.
Selling is the more common of the routes, but renting can help you build an additional income stream and hold on to your home if you ever want to go back. Even if you're a new landlord, transitioning a property from your own home to being a rental is doable—even for first-timers. Here are four factors to consider for renting out your home.
One of the best reasons to rent is for the extra income. When you rent your home, it should bring in enough to cover your mortgage, any upkeep costs (like maintenance, HOA, or management), and still turn a profit. If you can earn more from rental income than your total expenses cost you, you should consider renting out your house.
When considering profitability, you need to make sure your home is a good rental property. This means that it’s attractive to renters with in-demand finishes and amenities. You'll want to make sure your home is in a desirable location and that everything is in working order before renting — the more up-to-date your house is, the more rent you may be able to charge.
You might also want to hang onto your home if it won’t sell for a lot. Depending on how much equity you have in your home and any selling fees, you might make little to nothing from selling your home.
Even if you make a decent profit from selling, you could stand to make more long-term from renting it out. In this case, it’s a smarter financial move to rent your home instead of selling it.
A buyer’s market probably isn’t the right time to sell. When the market favors buyers, you’ll get less for your home. Waiting out the market until it swings in favor of sellers could be a better idea.
And, if your home is in an up-and-coming area, you’ll make more from holding onto your home. You can likely charge more for rent every year. Plus, after waiting a few years, your home could be worth much more than it is today — making renting your home a better option.
Another reason to rent out your home is if it has sentimental value. While you have to leave your home for now, you might hope to return some day. If you sell your home, there’s not much hope for ever getting it back.
For this reason, renting is best. Your rental income will pay for your mortgage and any upkeep. And when the time is right, you can come move back or pass the home to someone else in your family.
Renting out your home is a great option for most people. However, there are some cases where selling is better. Here are four signs you should sell your home.
Selling could be the right option in a strong seller’s market. A seller’s market helps you get the most for your home, with fewer contingencies and concessions. This type of market is the best time to sell your home.
A lot of equity in your home could make it even more profitable to sell during a seller’s market. The more equity you have, the more you earn from selling your home. With a lot of equity, selling in a favorable market could make you more short term than renting.
Renting out your home can be a great way to generate more income. However, renting out a house also comes with all sorts of expenses. You’ll have to worry about extra taxes, maintenance, HOA fees, administration, property management fees, and more. If you don't have the time or money to deal with the administrative costs of renting, selling is a better option.
Finding great tenants is key to successfully renting out your home. However, finding tenants involves marketing, tenant screening, applications, and more. After you find the right tenant, you then have to keep tenants from damaging your home, respond to any tenant maintenance requests or problems, and make sure you’re compliant with all landlord laws.
While you can hire a property management company to make managing tenants easier, it can be a lot of work for an unseasoned landlord. Don't have time to look into tenants? Consider selling.
You likely weren't thinking of rental potential when you bought your house. And that's okay. Some properties may not be great rentals. You may not have kept up with home maintenance, or maybe the property isn't in an ideal location. Either way, it may be more hassle than worthwhile to try renting out your home, and you may stand to lose money if your home sits unoccupied.
Like the idea of renting but your current property just isn’t right? Consider taking the profits from selling your “bad” rental and invest in something new.
After considering these eight factors, you might still wonder whether to rent or sell.
For many people, renting is a better option than selling. Renting can help you build an additional income stream and can be more profitable in the long run. Between rent and appreciation over time, you can often make more from renting than selling. You also get to hold onto your home if you’re sentimentally attached.
However, renting out a home isn’t for everyone. Your home may not be in shape to be a rental or maybe you owe too much on your mortgage that you couldn’t turn a profit. In that case, it’s better to sell and then invest in a different rental property.
If renting sounds like the right fit, you can check out our guide to becoming a landlord and top tips for first-time landlords to get started.
But before you start renting out your home, you'll need landlord insurance. Specifically designed for a property you don’t occupy, landlord insurance can help you protect your investment. And, this insurance could protect you from liability for tenant injuries.
The easiest way to get landlord insurance is with Obie. With our transparent, modern, and online approach, you can submit a quote request in minutes.
Get your free landlord insurance quote today to start renting out your home.