After some time and enough savings, you may decide to look for a new home. You may end up debating whether to rent out your property or sell it. It can be hard to pick one over the other since both provide advantages and disadvantages.

Check out the important things you need to consider, including how to become a better landlord, in this guide.

Renting vs Selling

It’s easy to go back and forth between the options of renting your unit or selling it. This scenario can happen because you:

  • Paid off your property
  • Completed many house upgrades
  • Are looking to transfer homes but want to earn better property returns
  • Are considering moving back after a certain number of years
  • Seek passive income to meet your financial targets
  • Want to make lifestyle changes
  • Want to cater to the high rental market demand

The prospect of becoming a first-time landlord might give you pause, as managing a property presents a lot of challenges. Before taking this step, you’ll need to be aware of the duties of a landlord to ensure you remain committed to the role.

Check Your Finances

Before selling or renting out your house, you’ll need to review your finances.

  • Do you need to meet mortgage payments? If yes, then you need to still have enough cash left over even after paying the regular mortgage dues
  • How much property tax do you need to pay? Taxes are fixed amounts you will be paying periodically, so this is critical when deciding to rent or sell your property
  • How much tax do you need to pay for capital gains? Check with your state, as this can vary depending on your location. It is best to conduct thorough research if you plan to sell your property.
  • What are the benefits and drawbacks of being an owner of two properties? You need to consider the costs of managing two homes, especially if you are still making mortgage payments, although you can benefit from tax deductions
  • Do you have other financial responsibilities that can affect your decision? Review first if you can pay off property maintenance fees, manage renters, and perform the tasks required of a landlord

A floor being swept.

The Costs Behind Selling or Renting A Property

Besides weighing your financial case, it is best to learn the costs of renting or selling your house. Once you become aware of how much you are expected to pay, then you can make the best decision.

Costs of Renting Out A House

When renting out your property, you need to be familiar with the common expenses that will cut into your rental proceeds, such as

  • Homeowners Association (HOA) fees
  • Property management fees (vary from 5% to 10% of the rental income)
  • Maintenance and repair charges
  • Property taxes
  • Insurance payments
  • Vacancy costs
  • Marketing costs

If you partner with realtors, you will also need to budget the commission fee if they land potential high-quality tenants or buyers on your behalf. In general, commissions for finding a tenant are lower than for finding a buyer.

Costs of Selling A House

When selling your property, you also need to take into account various costs as well, such as

The expenses from any of the above tend to range from 9% to 10% of the property price. Sellers generally absorb the costs.

Assessment of the Local Housing Market Environment

To ensure you make the right decision whether to rent or sell your unit, you need to carefully analyze the conditions of the local market. Once you have gathered all the information and gained insights from the data, you can readily decide.

A row of suburban houses

Current Rental Demand in Your Neighborhood

The market demand in your area can be impacted by several factors so you need to carefully consider the questions below:

Are there more jobs available?
Does your area reflect improvements?
Is it considered an affluent neighborhood?
Is it near universities and companies?
Has it become a trendy neighborhood?

It is useful to tune in to the local housing market so you will have a better idea of the rental price to assign and will also be aware of the occupancy rates. Take time to consult with real estate professionals or property managers in your local area to get accurate data on current rental demand and learn more about the factors that influence the demand.

How a Seller’s Market Differs from A Buyer’s Market

You need to learn how a seller’s market differs from a buyer’s market before you consider selling or renting out your property.

Seller’s Market

  • Higher property demand than available homes to purchase leading to overpricing
  • Sellers can profit more since buyers are competing to buy real estate
  • Property sales can be faster, as some buyers will skip property inspections
    Buyer’s Market
  • Higher available properties than demand for real estate resulting in underpricing
  • Buyers end up with better deals since there is less competition
  • Buyers tend to go through with property inspections

A pair of hands stacking some coins.

Potential for Home Value Appreciation

Whether you end up renting out or selling your property, you still need to consider future property appreciation. Factors that influence property appreciation are:

Duties of Landlords

Another thing you’ll need to consider is the responsibilities of a landlord, which include:

Bottom Line

Renting out or selling your home requires a lot of thought. You’ll need to assess your financial health, weigh the costs of renting or selling, check local market conditions, and familiarize yourself with the duties of a landlord.

It is a good idea to research and consult real estate experts before making a final decision to ensure you make the best choice.

Are you looking for an experienced property manager? If yes, contact Vineyard Property Management today!