The pros and cons of renting vs. selling your home

There are several advantages and disadvantages when you make the decision to rent. The most important thing is to be sure you’re up for the commitment.

Pros 

• Safer for a buyer’s market. Selling in a buyer’s market puts you at a disadvantage. High supply and low demand typically drive down prices, meaning you may lose money on the sale. If you’re facing a buyer’s market, renting is a way to earn income while you wait for the market to improve.

• Passive income. If you can command rent that surpasses your monthly mortgage bill, you’ll have a steady stream of passive income.

• Continue building equity. If you’ve only owned the house for a short period of time, renting will allow you to hold onto your home and build more equity, especially if  property values in your area increase significantly. If you plan on investing in rental properties in the future, you can use this equity to acquire a more attractive loan with lower interest rates.

Cons

• Being a landlord is work. If you decide to rent out your home, you’re signing up for a long list of landlord responsibilities. You can outsource these to a property manager, as long as you can afford the cost. 

• Unexpected costs. Renting a home can be financially draining if you experience extended vacancies, are faced with legal fees to evict difficult tenants, or if the property requires extensive or ongoing repairs. This is all on top of carrying the mortgage payment (or monthly rent) of your new home.

Determine if the market is in your favor and how much equity you can cash in on.

Pros

• Cash in the door. When you sell, you get cash in the door, which you can use to pay for your next home. If you’re living in a seller’s market, you might easily get offers at your asking price. And if your home is located in an area that’s in extremely high demand—you may get significant offers over asking price or all-cash offers.

• You don’t have to manage a rental. The life of a landlord is not for everyone. Although if this is the only thing holding you back and rental prices are looking high in your area, a professional property management company can help.

Cons

• You may lose money. Timing and real estate market analysis are everything. If you sell too soon, you might miss out on a higher offer or the benefit of building further equity. 

Here are the top 3 things to consider when making the decision to rent or sell. 

1. Is there demand for rentals in your area? 

Research the housing market in your area to find out if the demand for rental homes is high. You can also look at job growth, comparable homes for rent, and what amenities are in demand versus what your home has to offer to determine if you would have a competitive listing.

2. Are you ready to be a landlord? 

Although income from rental property is called passive income, being a landlord is hard work. If that’s something you don’t want to take on—but you still prefer to keep the house and rent it out—are certain you may want to hire a property manager. The management fee is an added expense, but property managers guarantee your peace of mind, and their services are often a rental property tax deduction. 

3. Can you sell for a profit? 

On the other hand, if you live in an area that’s a seller’s market, you’re likely to command an excellent sale price. Working with a real estate agent who knows the market can often help facilitate the ideal deal at the ideal time.

 Bungalow is the best way to invest and manage your real estate portfolio. We work with you to identify, purchase, fill, and manage residential properties—so that you can enjoy up to 20% more in rental income with a lot less stress. Learn more about Bungalow.