Should I Sell My Home Or Rent It Out? (2024)

By keeping the house, you continue to build equity as you pay down the mortgage with rental income. Plus, the market value of the home continues to increase over time. If the house is in good condition, in a favorable rental location, and you have adequate cash reserves, renting could be a wise decision.

Renting can change your home from financial liability to a profitable asset. Landlords charge about 1% of a home’s value for monthly rent, or $2,200 per month on a home worth $220,000. As a rental owner, you will need to maintain cash on hand to cover maintenance costs and the times when the home is vacant. Most landlords maintain cash reserves of $10,000 to $15,000 per property.

To make a profit, you will need to find and keep good tenants and minimize vacancies. Before you decide to rent, consider what the home has to offer. As with home buyers, tenants are looking for neighborhoods with low crime, good schools, convenient shopping and other neighborhood amenities. The best properties show well and include all of the appliances and conveniences of the home. How will your house compete in the local rental market?

You may want to rent your home if…

• Rentals are in high demand locally
• You want to be a landlord
• The house offers appealing amenities that renters seek
• You are confident that you can make a profit
• You owe more than you can make by selling
• The local home-buying market is weak
• You have a personal attachment to the house

Home values increase, on average, between 3.5 and 3.8% every year. A recent forecast by the National Association of Home Builders projected a whopping 14% increase in 2021 alone. If you’ve been in your house for more than a year or two, chances are you have amassed a good amount of equity lately. You may need that cash to purchase your next home, and there are other good reasons why selling could be the best choice.

The most important reason to sell is that you do not want to be a landlord. Managing a rental property requires knowledge of applicable laws, dealing with tenants, maintaining the property, and no shortage of financial issues. Many of these tasks can be hired out, but doing so cuts into potential profits.

Even if you want to be a landlord, your current house may not be a good fit. Maybe you are moving too far away, or the home is not in the right neighborhood, or needs too much work. You can always use cash from the sale of your home to invest in a better rental property.

You may want to sell your home if…

• It is a sellers’ market
• You don’t want to be a landlord
• The home needs lots of work before it will be rental ready
• You can’t charge a high enough rent relative to the home’s value
• The neighborhood is not enticing for renters
• You don’t have adequate cash on hand to cover vacancies and maintenance
• The house is not a good rental
• You have lots of equity
• You anticipate excessive maintenance issues due to age or condition of the home

We’ve outlined some of the top reasons for selling or renting your home. Maybe you checked boxes on both lists. Every situation is slightly different, but it mostly boils down to profitability and whether or not you really want to be a landlord. Your home may be a great place to rent, but if you don’t want to manage it, it is probably better to sell. But if you want to start earning rental income and your home is a good fit for the market, best of luck in your new venture.