If you are torn apart between selling your house or renting it out, don’t feel so stressed. A costly mistake would be deciding right away without thinking things through in a methodical way, so research and plan well.
There are a lot of benefits you can get from selling your house or renting it out, but before you can reap any substantial gains, you have to know the nooks and crannies of the playing field first.
When is Renting or Selling Your House the Best Choice?
Putting your house on the market is a pretty big decision to make and it may either hurt you or benefit you depending on the reasoning behind your move.
To make a good return from selling your house, you need to meet a number of very clear-cut conditions.
On the other hand, renting out your house is a good form of investment that can indeed pay off in the long run if done right. You can also turn this into a passive income stream if you apply the right techniques. Some manage to spend zero hours a week on physical visits through online monitoring and outsourcing maintenance services.
When Should You Sell Your House:
The Demand is Good
The COVID-19 pandemic has done a lot of damage to different markets, but it’s doing wonders for some in the real estate business. Since the big cities have been hit by the virus the hardest, people are looking to buy properties in the suburbs. This rise in demand for housing in the suburbs is a good indication that the market is pretty stable for suburb properties.
Take a look around you – current events, trends and needs of the people. Is your house in demand? If it is, then it is a good time to sell.
Prices are Soaring
If there’s a perfect time to jump on the market, it’s when the prices are high and the inventory is low. This happens when there is a lack of new construction to cover the increasing population of an area due to natural growth and migration.
This is always noticeable in places where tourism is just starting to grow. Low inventory can also be caused by high demand. When people are racing to buy properties, listings can run short.
Your House Fits the Current Needs of the People
Now that everyone is spending more time in their homes, the demand for bigger homes with large outdoor spaces and entertainment areas are on the rise. If your house fits these criteria, you have one more reason to sell.
The Economy is Healthy as Ever
Signs of a healthy economy include higher employment rates and more people looking to spend their money. These are the signs you need to look out for when deciding to sell your house.
You Have the Budget for Commission Fees
It is always best to hire a real estate agent to get the best deal out of your house, especially when you are not familiar with the market. After selling your house, a percentage goes to your agent. Most of the time, 6 percent of the value of your home is charged. If you’re selling your house for $300,000, then $18,000 goes to your agent.
Your House Needs Minimal Repairs
To get the most value from your home, it should be in good shape. Repairing any damages or making improvements to your home is one way to get more juice out of the deal you’re about to make. Just be careful about overspending because you might come at a loss.
You’re Ready for an Open House Staging
Touching up your house before putting it on display is the standard procedure. Nobody would like to buy an unsightly house.
Costs for staging can go as high as $1,500 and as low as $300, depending on the services you require. However, in most cases, the pricier the house, the more staging costs it requires. According to Crystal Leigh Hemphill, a real estate professional, staging a 2-000-square-foot-home can cost around $2000-$2400 a month.
You Can Avoid Short-term Capital Gains Tax
If you’re selling your house for more than you paid for it, you’ll have to pay the capital gains tax once it sells. Rates will vary depending on your income but are typically lower than the ordinary income tax rate. However, once you’ve held on to your investment for more than a year before selling, you’ll be taxed at a lower tax rate.
The Process is Straight-Forward
Complications are less likely to happen when selling a house once you’ve followed every step in the book. The process may be exhausting, but it’s straight-forward. You can also hire a real estate agent to do everything for you and find you a great buyer.
You Need Cold, Hard Cash
Whatever you need the money for, once you’ve sold your house, you’ll have cold, hard cash that you can spend right away.
When Should You Rent Your House:
You’ll Lose Money if You Sell Your House
It’s better to rent out your house than to sell it when the market is bad. While waiting for a better opportunity to sell at a higher price, you can take advantage of the situation by renting out the property. When the time comes and prices are on the rise, you can decide to sell.
Rental Demand is Rising
If the opportunity presents itself, it’s tough to say no. There are a lot of benefits to owning rental properties including security in the future. It doesn’t matter how little you make on your first month or the second, or the third. What matters most is the value of your property in the future and its intended growth.
Once you’ve decided to rent out your house, you can’t just jump right into the business right away. Having the property is only the first step. There are a lot more steps to take and a lot of factors to consider.
You Can Insure Your House Right Away
Buying insurance for your home as a landlord costs more than a regular homeowner’s insurance. This is because once you rent your home out, you are considered an investor. Expect a 25 percent increase from a homeowner’s insurance.
You Can Handle the Maintenance Costs
One of the hardest parts of being a landlord is handling tenants who don’t care for their rented home. However, this varies a lot by area, what kind of property you have and who you are renting it out to. Beware of students, some can be reckless.
Maintenance is an essential part of success in this kind of business. With an attractive property, you can get more potential tenants, and with a regularly clean property, you can get more regular customers. It is a necessary price to pay.
You Have Marketing Experience
To earn in the rental business, you need tenants. To find tenants, you need to market your property, and to do this, you have to invest a tiny portion of your budget into advertising. Having a website is a must. This is where primary advertising will happen. Besides, having a website will increase the trustworthiness of your business.
You Have Emergency Funds
There will be times when your properties will be empty while utility and maintenance fees are ongoing. During these times, you have to be ready to cover for the losses. This is normal, and you should not be worrying. An excellent way to adjust to these times is to have an emergency fund set aside exclusively for ongoing fees during downtimes.
You Want a Good Investment
Land ownership is one of the best investments out there. The number of land people can buy is finite, making it a very valuable asset. As time goes by, your property’s value may increase depending on where it is situated and the demands of the market.
Now, if you rent your property out, you’ll be able to make some profit while its value increases. You are guaranteed pure positive returns in the future if you play by the rules.
You Want a Source of Passive Income
It’s only recently that rental homes became a great source of passive income because of technology. Now, you can collect fees and accept tenants without meeting them in person or accepting payment physically. Thanks to online applications that make this possible.
Monthly payments from tenants can be applied to pay mortgages. As time goes by, your profits grow while your mortgage shrinks.
Selling vs Renting: The Verdict
Sell when you are guaranteed a significant profit.
If you want to sell your house and the market’s current status allows you to sell at a higher price, then go ahead, sell. However, if you can see a better selling price in the future, it’s always best to wait. Remember, the market can only crash and rise. You just have to make your move at the right moment unless you need the money now.
Rent when the market is bad. Rent if you have the resources.
On the other hand, renting out your house is almost always the best option. Investing your money into something that can only grow will always be a good decision. You just have to learn to play by the rules and work smartly. There are many risks involved in the rental business, but payout from successful management is worth the time and effort.
