Sep 14, 2021 / Selling
Is it Better to Sell or Rent Your House?
For many homeowners, when they outgrow their “starter” home, they decide to sell it and then move onto a bigger place. However, did you know there might be another option available? For some homeowners, particularly those with real estate investing ambitions, it makes sense to actually rent their old home rather than sell it.
Let’s take a closer look at the pros and cons.
You Can Build More Wealth in the Long Run
Real estate investing is a long-term strategy to build wealth. Although the market can fluctuate, for the most part, real estate will almost always appreciate in value. Owning two or more properties will help you expand your wealth and grow your investment portfolio.
If the mortgage is paid off on your first home, any rental income will just be added as positive cash flow, but if you’re still paying a mortgage, your renters will essentially be paying the mortgage for you.
However, before you make the choice not to sell your home, and rent it instead, there are a few things you should consider.
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What Will the Cash Flow Look Like?
Before deciding to sell or rent, consider the numbers. Add up all the monthly expenses, and then realistically estimate how much you could charge for rent. If the number is in the negatives or is too low for you to consider taking on the responsibility of becoming a landlord, it’s better to sell.
The return on investment (ROI) is important as well because it will mean how much profit you make and how quickly you get it.
For example, let’s say you sell your home and make a $50,000 profit, that’s money in your pocket right away. However, if you rent your home, after paying all the expenses and collecting rent, you might only see a positive cash flow of $1,000 per year. Although your investment will no doubt appreciate over time, you can see how a one-time payout of $50,000 might be more desirable than annual profits of $1,000.
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Consider the Area
If you are currently living in an area that is in the midst of a redevelopment, it might be more beneficial to rent for now and then sell later. However, if you notice your town’s growth moving away from your property, it’s better to sell sooner rather than later.
It’s almost impossible to predict with absolute certainty what a city’s development will bring, but you should be able to see a few signs that might predict things moving one way or another.
Wondering if your area is on the way up? Read our blog on how to tell if a neighbourhood is improving here.
Are You Prepared to Be a Landlord?
Renting a house is more than just collecting a rent check every month. It’s a big responsibility that requires care and consideration and shouldn’t be a decision that you take lightly.
As a landlord, you would be responsible for maintenance, emergency repairs, and ensuring your tenants have a healthy and safe place to live. Additionally, dealing with tenants requires management and interpersonal skills.
If you want to be a landlord without handling the day-to-day responsibilities and repairs, you can also employ a property management company to handle these logistics for you. However, this is just another added cost that could eat into your ROI.
Interested in learning more about real estate investing? Reach out to us today here to get the conversation started.
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