Maybe your children have grown up and moved out and you are ready to retire. Maybe you have decided to make radical changes in your life and need a change of scenery. There are many reasons why someone may decide to leave the house where they have lived for a long time.
If you are considering a change, you should weigh the benefits of renting vs. selling a home. Depending on your plans, finances, and outlook, one option may be far more appealing than the other.
Reasons to Rent
1. Cash Flow
Many people like renting out their homes because it can provide a steady stream of income. If you have paid off your mortgage, rental income can be an excellent supplement to your salary, pension, or other revenue. If you still owe on your house, you may be able to charge renters your monthly amounts plus a premium, so you can continue paying down your debt and making a little extra as well.
Of course, you have to spend money to make money. If you have been living in your home for a while, you may have to invest in some refurbishments to make it appealing to renters. You will have regular expenses like cleaning, maintenance, and management. If you live far away, you may have to pay someone else to take care of broken appliances and other issues.
You may need to learn more about the hidden costs involved in becoming a landlord before you decide between renting and selling your house. You should also learn the various tax benefits and detriments: by becoming a landlord you derive a whole new stream of income which will give you certain write-offs and deductions.
2. You May Return
The great aspect of renting out your house is that you leave open the opportunity to return. If you are exploring a job opportunity in another country, or are taking a sabbatical, you may want to be free of your house expenses for a year or two but you may not be ready to make a permanent decision.
If you lease your house, you have that time to get away and make a leisurely choice. You may find you miss your old haunts- or you may decide you never want to return!
It’s sometimes hard to tell what life has in store. Sometimes people return to the town where they grew up and to their parents’ home when it is time to raise children of their own.
Just make sure the terms of your lease are firm and protect you in any circumstances. You need to make sure that you have specific dates for the beginning and end of the lease, so if you do decide to return you can ask your tenant to vacate the premises.
For many of us, our houses are our greatest asset. They may take a big chunk of our monthly money, but real estate is almost always a safe and reliable investment.
The amount of equity you build in your home increases over time. Depending on your market if you can be patient you can see a significant rate of return.
For example, say you bought your house for $150,000 in 1990. Today it might be worth $250,000. or more. If you can hold onto it ten more years, it may exponentially increase in value.
Unless you need cash immediately, holding on to your house and renting it allows you to keep building on your equity. You can borrow against that asset, or you can wait a few more years and see a greater return on your investment.
Reasons to Sell
1. Need Cash in Hand
There are times in life when we need to get our hands on a lot of cash quickly. Maybe it is for your kid’s college tuition, or to take care of Grandma.
Selling your house may not be a fast way to liquidate, depending on the state of the market where you live. However, it can free up large sums of money and pay off your mortgage pretty reliably if you need cash.
There may also be tax advantages to selling, depending on your personal situation.
2. What’s Done is Done
Some people want to be out and done. After a divorce or a family tragedy, sometimes the best thing to do is make a clean break and start all over somewhere else.
You may want to move to a different part of the world or embrace a totally new lifestyle. Maybe you can no longer afford the life in your old home and you want to start with a clean slate.
Selling your home cuts the ties neatly and lets you move on into the next phase of your life.
3. No Liability or Mortgage
If you own a home, you have to take responsibility for it, even if you are renting it to others. If someone trips on your sidewalk, you may get sued. If your renters make trouble for the neighbors, you may be notified.
By selling the property, you take yourself out of the liability chain. You do not have to worry about city codes and property tax hikes. You certainly do not have to worry every time the dishwasher breaks down or every time a tenant breaks the lease and deprives you of their monthly payment.
Without the monthly mortgage bill, you may find many other uses for the money that went into keeping your house. You may take the money you earn from the sale and invest it wisely, reaping a more consistent monthly income than the promise of future earnings.
Renting vs. Selling a Home: What’s Best For You?
Many of the factors which go into deciding on renting vs. selling a home depend upon your individual resources, goals, and life plans. If you are at a stage in your life where you need to make a clean break, you may want to wrap all of your affairs up and start all over.
On the other hand, if you are in limbo professionally or personally, or if you are not ready to make a permanent decision, you have options.
Keep checking back for more helpful tips on living your best life.