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Should I sell or rent my house 

 April 30, 2021

By Scott Teesdale  

minutes read time

The decision to sell or rent your home is a question that homeowners have been asking themselves for generations? They wonder if they should receive a large financial windfall now (that they can put towards a new home) or should they try to make the finances work while slowly building their real estate empire.

The question usually boils down to this: selling your home means you’ll receive a large lump sum of money from the buyer that could possibly go toward your new home. Depending on the housing market in your area, you might receive more or less than what you paid for it because it might not be the best time of the year to sell a house. On the other hand, renting your property means you can become a landlord and make passive income every month by collecting rent. However, if you don’t have a lot of time on your hands then renting will become tedious to you. 

Whatever the case, there are pros and when it comes to both selling and renting a house. Today I will discuss both to help you make that decision.

What are the benefits of selling my house?

There are many benefits to selling your home (vs. simply renting it out), with the biggest one being that the financial gain can be great because you’ll receive a lump sum of money once it’s been sold.

In the best case scenario, you’ve already paid off your mortgage and/or built up a lot of equity in your home. During these years, your house appreciated in value — as homes typically tend to do — and now you’re selling your home for much more than you paid for it. This way, not only will you get all of the money back that you paid for your home, but you’ll also make a profit on top of that money. 

Furthermore, if you’re moving to a new location and plan on buying a home, the lump sum of money you receive from selling your old home will make a great downpayment on a new one.

Another benefit of selling your home is the tax advantages. Federally, you do not need to pay taxes on the first $250,000 worth of profit when selling your home. If your house appreciated for less than this, you may not need to pay taxes on that appreciation!

What are the disadvantages of selling my house? 

While there are a ton of benefits to selling your house, there are also some disadvantages. One of the main ones being that you have no control over the housing market. If you’re preparing to sell your house quickly because you’re moving far away and the housing market in your area has plummeted, you can expect to make back significantly less money than you paid for your home in the first place. Plus, if you take out the extra fees it takes to sell a home — like fees for a good home seller agent — you might find yourself losing tens of thousands of dollars once your sale is complete. 

Another disadvantage of selling your house is that you lose an opportunity to continue to build equity in your home. Owning a home is an investment in yourself. Once you sell it, you lose out on tax break opportunities, future market appreciation, and more. 

All of these need to be considered when deciding whether or not to sell your house. It can be a costly decision to make. 

What are the benefits of renting my house?

First and foremost: wealth creation. Many real estate investors have created generational wealth by renting out their homes because of how profitable and predictable real estate is. If the rent payments cover the mortgage of a home then you will find yourself building a mini real estate empire. Building equity in your home is an asset that appreciates and can bring up your net worth. It’s true that 90% of millionaires build their wealth through real estate.

If you’re thinking about renting a house, there are a ton of benefits that you can take advantage of with the biggest one being a profitable source of passive income. Also, you won’t have to worry about getting your house ready to sell because you’ll be keeping it.

Renting out your house means that you’re deciding to take on the position of a landlord and look after your tenants. Every month you’ll collect a rent check just for letting tenants live in your property. This can increase your annual income drastically, especially if the property your renting out has more than one unit.

On top of that, it can benefit you a lot if you haven’t already paid off your mortgage. Instead of continuing to pay on your old mortgage and on wherever you decide to live in the future at the same time, your tenants’ rent payments can cover your old mortgage while you still hold the house in your name. You’ll build equity in the home without the mortgage payments coming out of your own pockets. 

What are the disadvantages of renting my house? 

Reason #1 is clear: constrain on your finances. Most of us can’t afford to rent out our home while purchasing another. We usually need the funds of the sale to finance our new home purchase. Said another way, if you’re actively looking for other investments, renting out your house might not be a great option because it ties up your money in your rental property. If the rent you’re collecting doesn’t cover your mortgage, you’ll find yourself paying out of pocket for a property you don’t live in. You’ll only be receiving monthly payments from that property so it can be a really expensive long-term commitment.

One of the biggest disadvantages of renting a house is that it forces you to remain living in the area of that house so you can be there to take care of it as a landlord. It’s a lot of work and while you can hire a management company to do the work for you, these types of companies can be expensive. 

On top of that, having tenants living in your house can decrease its value because they might not treat it with as much respect as you do. If your tenants ruin your property by breaking things and not being clean about their living space, you can expect your property value to plummet.

Should I sell or rent my house?

When it comes down to it, your current financial situation will most likely determine the best option for what you do with your house. If you plan on staying close to the same area of your old home and want to make passive income on the side then becoming a landlord by renting out your old house might be right for you. You’ll have to put in a lot of time and effort because being a landlord can be a full-time job on its own. On the other hand, selling your house will result in a large lump sum of money that will work as a great downpayment for your new home. Also, your new home can be anywhere in the world because you aren’t bound to one area and you don’t have to worry about any pesky tenants ruining your property. But still, you might sell at a bad time in the housing market or be forced to sell your house as is and run the risk of losing a lot of money from the situation by settling on a deal that was lower than what you wanted.

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I use data and technology to help Millennials navigate the ins-and-outs of buying or selling a home in today's market. From appraisals to mortgages to zoning, I cover it all with the goal to teach others. Connect with me on social via the icons above.

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