Whether you’re moving because of a new job or want to move to a new place, you might wonder, “should I sell or rent my house?”. There are many good reasons to do both, but it depends on your situation. It is often a difficult decision for homeowners, and everything has its pros and cons. Examining the important factors below can help you decide which solution is ideal for you.
Let’s undergo some pros and cons so you can better understand what might be the right course of action for you.
Factors to think about when making the decision.
This decision shouldn’t be taken lightly because it can completely change your financial situation. You’ll have to balance several factors when deciding whether to rent or sell your house, but it all comes down to how much money you stand to make. If you’re renting, will the monthly income from tenants be worth the effort?
And if you’re selling, how does that compare to the return on investment you could get by renting out the property and letting its value increase over time? Before you decide whether to rent or sell your home, there are a few things you should take into account.
When to sell your house.
Think you would possibly want to sell your house? If you fall into one of these scenarios, selling could be a better option than renting.
- It would be best if you had cash to pay for the next house. You would possibly not be in a position to buy a new place with your current finances. During this case, you’ll need to sell the first home and then use the proceeds to pay down the new house.
- Being a landlord requires continuous effort and can be difficult to keep up with. You would need to be available for tenants often, meaning you might not have free time. In this case, selling the house may work out better, so that home repairs and finding contractors is no longer your worry when something goes awry.
- If you sell your home, the capital gains tax exemptions might spare you from paying taxes on $250,000 of the total sale. However, to be exempt from paying capital gains taxes on your home sale, you must prove that the house was your principal residence for at least two years before selling it.
When to rent your house.
In case you think renting could be a better option instead of selling. Here are some scenarios where renting may be a better idea.
- It would be best if you had the rental income. The additional revenue from renting can help your finances. If you’re buying a new home with a mortgage, lenders will consider your income when helping you find financing. Usually, only 75% of your income can be viewed as an actual mortgage.
- If you think that the home values in your area are increasing, you may want to rent now and sell later when prices are at their peak. Appreciation rates aren’t usually too high, so ideally, it should only take a few years – though you don’t want to wait decades as it’s just a rental property.
- If you only plan to live in your new city for a few years before returning to your current home, then renting could be a better option than buying. With this option, you have the safety net of being able to move back into your previous home upon returning.
Pros And Cons Of Renting VS Selling
Weighing the pros and cons of selling or renting out your home? Here’s what you should consider.
Tips for homeowners before selling their homes.
From start to finish, selling your home is generally a long and frustrating process. It’s one thing to have prospective buyers look around your house, but it’s another when they feel comfortable enough to open up your closets and poke through your belongings. Not only that, but these strangers will also criticize you and your house openly – oftentimes offering you less money than what you believe the property is worth.
For individuals with no prior experience in Real Estate transactions, making even the simplest mistake could prove costly down the line. To avoid these kinds of issues, Canadian homz is the solution for anyone looking to quickly and easily sell their home. By listing your home on the website, you open yourself up to a larger market of potential buyers who are willing to pay top dollar for your home. Also, here are a few key things every home seller should remember:
- Keep your emotions restrained and stay focused on the business aspect.
- Hire an agent. It will cost you in commission, but it eliminates the risk of making mistakes when promoting.
- Set a low price.
- Note the time of year and try to skip winter if doable.
- Make your home look appealing in order to sell quickly
- Take time over your listing and add many high-quality photographs, inside and out.
Costs of Renting Vs. Selling your house.
Understand that there are costs incurred with both renting and selling homes. Weigh whether your rental income would manage mortgage expenses and the upkeep of two properties. Research other comparable properties in the vicinity to understand how much they charge for rent; this will give you a ballpark idea of what you can set monthly.
When you’re renting, there are a number of costs to keep in mind, including monthly rent, maintenance and repairs, hiring a property manager, and taxes.
Costs of renting out a house.
These are some of the costs you should be aware of when renting out a house:
- Mortgage: Make sure that the money you make from renting covers the mortgage of your rental house while also being prepared to pay the mortgage on a new home.
- Property taxes: Property taxes will generally go up as your property’s value increases. It might help if you were prepared to pay for them.
- Home repairs: Keep your tenants happy by budgeting for repairs as soon as they come up. Try to set aside 1% of the home’s value for this purpose.
- Finding tenants: Finding tenants can be costly, between advertising and paying for credit and background checks. Keep this in mind when you’re setting your rental rates.
- Property management fees: On average, property management companies will charge 10% of the rent.
- Tax filing and accounting fees: Some business expenses, like tax filing and accounting fees, are expensive but necessary.
- HOA fees: Some neighborhoods require homeowners to pay monthly HOA fees, ranging from $200 to $2,500.
- Vacancies: Finding a new tenant may take some time, so keep that in mind when the old one moves out. Considering the months of not having a rental income might be best.
- Landlord insurance: This type of coverage protects against damage to the property and injuries that could occur while someone is on the premises.
Costs of selling a house.
Similarly, when selling your house, there are a few main expenses you’ll need to take into account:
- Renovations & additions: Many tenants prefer to rent a property that has been recently remodeled or rebuilt. You’ll also need all repairs needed. You’ll also need a pre-listing inspection to ensure the house is ready to be sold.
- Real estate commission: If you use a real estate agent, they will charge anywhere from 2-6% of the selling price.
- Utilities: You are responsible for paying any outstanding utility bills until the closing date
- Home loan payoff: The mortgage lender will be paid off using the proceeds from the sale of your home
- Closing costs: You may have to pay some or all closing charges, which can include things like legal fees and property taxes.
- Home staging: Making your home more attractive to buyers by adding furniture or other items. This will cost $2,500 or more.
Bring in experts to help you make sense of the financials.
Although it may appear easy to turn your home into a rental property, you should always consult with real estate attorneys and accountants beforehand. This ensures you follow all tax laws, zoning ordinances, and local property rules.
You might be eligible for some tax deductions, but it’s critical to know which expenses qualify as deductible. Also, there are yearly limits on how much you can deduct; therefore, the amount you claimed on your taxes for the rental activity could be different from what is actually reported.
In addition, an attorney can help you become familiar with the landlord-tenant regulations, which differ based on your state and locality.
Finally, talking with an attorney can facilitate your determining applicable house rules and emergency contacts. Price your rental property fairly by investigating other rentals in your area. Tenants often try to find the best deal, so make sure you set a competitive rent while still emphasizing all of your home’s great amenities.
Using Canadian Homz to maximize your profits.
Think long and hard about the question, ‘Should I sell or rent my house?’ If you decide to sell your home, you want to ensure you don’t leave any money on the table. The best way to accomplish that is to work with a professional Realtor. Canadian Homz 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 much less stress.
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