If you plan to move soon, you have a few options on what to do with that house you own. Namely you can go one of two ways: you can rent it out or sell it.
Here are a few things to consider as you weigh your options.
You Should Sell Your House if You Need the Money
When most people are looking to move, they need to sell their current home to have the funds they need for the new one.
For example, let’s say you want to buy a $300,000 home and you have $90,000 of equity in your current home. By selling your home and using your profit as a down payment, you can avoid paying PMI on the new house.
Now, this isn’t always the way to go. For example, maybe you’ve decided to rent for a few years. In that case, you may not need all of that cash right now. Renting out your house might make more sense so you can let the house grow in value.
Sell or Rent – Are You Underwater on Your Mortgage?
While this won’t apply to most people these days since the real estate value has been climbing for so long, it’s still something worth mentioning. If you currently owe more money on the home than it’s worth, it might make sense to rent it out for a while. That way you can let the home’s value grow, at least putting you in the black a little before you sell.
The alternative is selling the home and continuing to make payments on something you don’t even own. That’s no fun.
Rent Your Home or Sell – Could You Invest the Cash?
The first thing we referenced was needing the cash for something like a down payment.
Maybe that’s not the case for you, but you could invest the cash in something profitable. For example, maybe you have a side hustle that you think could grow quickly with a little cash behind it. In that case, maybe you should sell the home and use the proceeds to grow your business.
Or maybe you know of a great investment opportunity. Assuming you’re confident it will fly, maybe it makes sense to put some money into that.
Sell or Rent – Do You Want to Manage Tenants?
Something else to think about is the actual property management associated with renting out your home.
Think of everything associated with managing the property:
- Make sure it’s cleaned and in good condition
- Market the property to potential tenants
- Show tenants around the home
- Write the contract
- Fill out the contract with the tenants
- Collect monthly rent
- Deal with maintenance issues
- Repeat the process when the tenant leaves
Yes, rental property is a great investment. But it also requires some work! You could always choose to hire a property manager instead, but they aren’t cheap.
Should you rent or sell your home when you move out? The short answer is it depends. If you could really use the cash now, it might make more sense to sell. But if you’re willing to deal with property management and don’t need cash, maybe you should let a tenant pay the mortgage and let your property value grow. Either way – let us know how we can help you move into your new home!