Has the current real estate market in Bristol, TN/VA and surrounding Northeast Tennessee and Southwest Virginia regions got you thinking about making a move? If so, you may be weighing whether it would be better to sell or rent your current home. As you may have guessed, there are pros and cons to both options, and it comes down to your personal financial situation to determine which is best. To help with your final decision of selling vs. renting, we’ve outlined the pros and cons of each option and five things you should consider before selling or renting out a property.
Pros of Selling Your Home Instead of Renting It Out
Becoming a landlord can be overwhelming and time-consuming, so selling your current home may be the best option if dealing with rental property is not your cup of tea.
- Using the money from your home equity gain as a down payment on your next home or for moving expenses and improvements on the new home
- Cashing in on one of your biggest assets
- Take advantage of the seller’s market to sell your house for a higher price
- Free from the responsibility of maintaining and making repairs to a rental property
Cons of Selling Your Home Instead of Using It as a Rental Property
While the market is hot and homeowners think selling their home will be quick and easy, the home selling process may not always go so smoothly.
- Worrying about recouping recent home improvement costs
- Paying for professional cleaning and staging before putting your home on the market to ensure it looks its best for potential buyers
- Making unanticipated repairs to get to the closing table
- Covering the costs of selling, such as real estate commission fees, closing costs, etc.
Pros of Renting Your House Rather Than Selling
While all situations are different, having the option to rent your current home after purchasing another one can create passive monthly income.
- Diversify your assets
- Continue to build equity in your previous address
- Using rental income to cover part or all of your new mortgage
Cons of Renting Instead of Selling
The idea of a positive monthly cash flow with a rental can be tempting, but it’s important to remember that it’s not a hands-off investment. You must continue to maintain the property at the same time as taking care of your primary home. Other downsides to becoming a landlord include:
- Total time and expenses required to maintain and find tenants
- Dealing with renters
- Paying taxes on multiple properties
- Ensure you have the funds to cover any evictions or vacancies with your rental
5 Considerations When Deciding to Sell or Rent Your Home
Understanding the current housing market is necessary to make a well-informed decision about selling or renting your home. Five things you should consider before making a final decision to sell or rent your home include:
1. Housing Supply
If it’s a seller’s market with a low housing inventory, putting your home on the market for sale can help you maximize your home’s selling price because there is a limited supply of houses with higher buyer demand. On the other hand, selling when there is a high housing supply can make it harder to sell and lead to a lower sales price.
2. Home Sales
If you notice local home sales going through the roof, it means more buyers are searching for homes in your area. Therefore, putting your home on the market may mean greater competition, so you could get more bang for your buck by selling now rather than waiting. If home sales seem to be dropping, it may be hard to find an interested buyer and you may not get as favorable of an offer as you would like. Therefore, in areas with lower home sales, it may be better to rent your home and list it later.
3. Rental Demand
Similar to home purchase demand, when there is a high demand for rentals in the area, homeowners can maximize their investment by collecting rental income during a time when the local rental market is hot.
4. How Affordable Rent Is in Your Area
When rent prices are high, causing renters to spend more than 30% of their income on rent, it can be harder to find tenants at premium rental prices. However, when rent is more affordable and renters can spend less than 30% of their income on rent, it’s easier to fill vacancies. Typically, you’ll be charging less in rent in this case and renting out your property may not make financial sense.
5. Property’s Age
Since the property maintenance costs and concerns can increase with older homes, selling can ease your mind about potential big expenses that could arise when deciding to keep the property as a rental.
When deciding if selling or renting out a property is best, you should examine your financial situation. You can use NARPM’s rent vs. sell calculator to help to assess the two options. After determining how much you’ll earn by selling now and how long it will take to make the same amount by renting the property, you can decide if the monthly rental income is worth it. Consider your current and future needs to choose the best option for you and your family.
If you have questions about the current SW Virginia and NE Tennessee real estate market or are curious about your home’s value, contact us to speak to one of our knowledgeable professionals.