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Renting vs. Selling Your House: The Pros and Cons

Posted by Jan Wieder   |   September 12, 2019

If you are planning to purchase a new home, you have to decide what to do with your existing one. Residential property owners have two primary choices in this situation: renting or selling the house.

Renting vs. Selling Your House The Pros & Cons

When it comes to choosing between these options, there are several factors to consider, including finances and your future plans. Both renting and selling your house have several pros and cons, and the suitability of the decision ultimately depends on your individual circumstances and personal preferences.

 

 

Is renting out your house worth it?

Turning your house into a rental property can provide you with passive cash flow, as well as the ability to hold onto a property you may need to use again in the future, but it can also present challenges. Here is a look at some of pros and cons to consider before you rent your Seattle property:

 

Expenses vs. revenue

One main draw property owners have towards renting a house is receiving passive income from rent each month or year. However, in the process becoming a landlord, you also incur several costs through insurance, repairs, homeowners association (HOA) fees, utilities, advertising, and property management fees. Before electing to rent your property, calculate the sum of these expenses and see how that compares to a monthly rental fee that you can expect to charge in the Seattle area.

Keep in mind you will be taxed on your property as an income-producing asset, but you also can write off all the costs associated with renting, and potentially claim a deduction for depreciation on the property, as well.

Related reading: A Local's Guide to Des Moines, Washington Restaurants

 

Becoming a landlord

Renting your home means assuming the role of a landlord and that naturally comes with managing tenant relationships. You must periodically undergo the process of recruiting and vetting applicants to find a qualified candidate to rent your home. You have marginal control over your tenants’ lifestyles and behaviors and the way they treat your property, and even good tenants will call with questions or maintenance needs.

Related Resource: How to Handle Tenant Emergencies Over the Holidays

However, for a fee, you can partner with a Seattle property manager to help alleviate a significant amount of responsibility and stress that comes with being a landlord. This is especially beneficial if you are moving out of state, or even to a different town, since it hinders your ability to keep an eye on the property, build a relationship with your tenant(s), and respond to problems.

 

Market conditions

If you’re potentially taking a significant hit by selling your house because of market conditions, renting can be a good way to weather the storm, so to speak. As long as you can cover your mortgage and other expenses with rent, you will be able to keep your home until its value increases and/or market conditions improve.

The same concept applies if you are planning to return at some point. For homeowners who are uncertain about the future or temporarily relocating for work, renting a property rather than selling it can provide some security and a place to come back to if the need arises.

Related Reading: [Real Estate Formulas Cheat Sheet] 12 Math Calculations for Landlords

 

How does selling your house compare to renting?

Selling a house outright can also be a good option under certain circumstances, such as the condition of the real estate market, your current need for income, or your future plans. Here are a few pros and cons to factor into your decision-making process:

 

Moving on

Selling your property allows you to simply leave it behind and take the equity from your home to use for other purposes, such as a valuable investment or down payment on a new home. Depending on your circumstances, dealing with the property may create more stress and trouble than it’s worth. If you’re moving out of state, or out of the country, trying to manage a rental can be especially challenging.

 

Leaving a dropping market

It’s difficult to know exactly what will happen in the future, but if it seems like the real estate market is dropping, selling your property allows you to make the most of your home’s equity while you can. If you are still set to make a return on your investment by selling your house, it may be the more prudent decision.

 

Tax benefits

You may be excluded from paying capital gains tax – which can be up to 20% depending on your tax bracket – on the sale of their primary residence, or somewhere you’ve lived at least two years. The IRS allows you to exclude a sale up to $250,000, or $500,000 if you file jointly with a spouse. Tax laws can change, though, so it’s important to check out the IRS’s current capital gains tax exclusion and eligibility rules before banking on them.

 

Is it better to rent or sell a house?

Making a decision about a significant asset, such as a house, should not be taken lightly. Both renting and selling are laden with a variety of challenges and benefits, the weight of which may vary depending on your unique situation. If you are looking to become a landlord, consider that partnering with a property management team in Seattle, such as Powell Property Management, can help you achieve a smooth transition and make renting less stressful and more profitable in the coming years. Read: How Much Does it Cost to Hire a property Manager?

 

How to Get Maximum Rent for Your Property

 

Sources

“Should I Rent or Sell My House.” By Bill Gassett, RE/MAX Real Estate agent. Accessed online at https://www.maxrealestateexposure.com/rent-or-sell-my-house/

“Should You Sell Your House or Rent it Out?” Forbes.com. accessed online at https://www.forbes.com/sites/brandonturner/2016/10/04/should-you-sell-your-house-or-rent-it-out/

Topics: Real Estate Investing 101

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