Renting vs. Selling Your Home: What Choice Is Right for You?

October 6, 2021
|In Uncategorized
|By Anthony Kane

When you’re planning to move to a new area, you have to make a plan for your current house. Will you sell it or keep it and rent it out to tenants? The renting versus selling question is a big decision and shouldn’t be taken lightly. Review the benefits of renting and selling a house to see which option may suit you best.

Benefits of Renting Out Your Home

In some situations, renting your property is a better choice than selling, which is why millions of Americans choose to become landlords — or turn to a reputable property management company — after purchasing a new home. By renting our their home to tenants, they see several benefits (and so can you):

  • Flexibility: When you need to buy a new home, the housing market might not be in the best position for you to sell your current home. Renting it out can allow you to “time the market” and wait until the home values in your area reach a level that will enable you to sell with a comfortable profit.
  • Stability: A rental property can provide you with a stable income, especially if you can rent it out for more than the mortgage payments and any expenses. No matter what happens in your personal life, you will have this steady stream of income. Additionally, you can turn to annualized tax benefits, refinancing opportunities, and real estate appreciation whenever you experience short-term losses with the rental.
  • Tax advantages: Rental income can be offset by tax deceptions (such as depreciation and operating expenses). You can write off expenses related to utilities, mortgage interest, property taxes, and others. This will give you a cash flow that can be used in other areas of your life.
  • Debt paydown: One of the greatest advantages of renting your house is that the tenants pay off the home for you. Their rent could potentially cover the mortgage payments plus a little extra to give you a profit over time.
  • Leveraged appreciation: Another benefit to renting out your property is the increase in value you may see. Over time, you will realize a greater appreciation. For example, when you have 20% down on a property, you will see five times the appreciation on the home, so if the house appreciates by 3%, you will realize 15% appreciation.

If you’re thinking about renting out your house, you may find it helpful to hire a property manager because it can be challenging navigating this new venture on your own. Whether you’re in Temecula or Hemet, property management services can help you handle leasing agreements, rental payments, and even maintenance and repairs.

Reasons You Should Sell Your House

Of course, managing a rental property is not suitable for everyone. For example, not everyone desires to be a landlord, and this should weigh heavily on their decision to rent or not. For others, it makes more financial sense to sell the house. Here are some benefits to selling rather than renting:

  • Cash Out Equity: When you sell your home, you can recapture your equity and use this cash to put a down payment on another house or other investments that will have higher rates of return.
  • Rents Cannot Support the Property: In some markets, renting homes is just not feasible. There may not be enough demand for rentals, poor applicant pool, or improper price-to-rent ratios. This may result in your income failing to meet your expenses (mortgage payments, taxes, insurance, management, etc.), and you’ll quickly see a loss on your investment. In contrast, selling can help you see profits right away.
  • Protects You From Dropping Home Values: If your goal is to rent a property for only a short period of time, you should evaluate the historical trends in your area. Are home values rising or falling over time? If they’ve been dropping, it would be best to sell your house now rather than waiting until later (when the market could be worse off).

To Rent or to Sell?

Deciding to rent or sell your home is not a decision you can make overnight. You will need to consider your financial situation as well as your personal preference for taking on landlord duties. A local agent can help you determine if the market will support renting or selling your house.

If you choose to rent your house, you will want to work with one of the best property management companies in San Bernardino County and the surrounding area. Our team at California Realty Group would be happy to help you make all the right moves to manage your investment with solid returns. To learn more about the benefits of outsourcing your property management, contact us today.