If you are ready to move on to a new home and you are a home owner, it can sometimes be tough to decide what to do with your existing property. For most of us, selling is the right way to go but it might not be the right choice for you. Here are some things to think about before you decide.
Selling Your Home
There are a lot of reasons to sell. Here are just a few.
- You have equity in your home and you want it.
If you owe less than your home is worth, you can sell your home and take the money. You can then either sink it in your new home, pay off bills or perhaps put it down on some investments. Keeping your money in a home is a good investment but there are others that you might want to pursue and they might involve less stress than you would have as a landlord.
- You don’t want to mess with renting.
Renting a home can be a headache at times. You have to find a tenant and then screen them. You have to make ready the home. You have to make sure that you are following all applicable housing laws. There is a lot to do and for many people it is just not worth the stress.
Of course, you have the option of hiring a rental management company. They would take a lot of the headaches away from you but this will come at a financial cost.
- You are emotionally invested in your home.
If you have lived in your home for any length of time, you might just be emotionally invested in it. It can be hard to then see your home become a rental and int he hands of someone who is not going to care or appreciate it like you did. In these cases, it is often best to just sell the home to avoid any possible stress.
- You have lived in your home for more than two years.
If you have lived in your home for more than two of the last five years, you can take the profit from the home and enjoy it tax free. If you rent it for any length of time, you could possibly lose this tax benefit.
To qualify for these home sale tax benefits, the home must of been your primary residence for two of the last five years.
- You are not very handy.
Things will break and need repair on a home. No matter how well built it is, something is going to go wrong from time to time, especially when it is tenant occupied. If you are not very handy, you will have to pay to have things repaired. This can add up in a hurry. Even simple repairs can cost 400 dollars or more and these can add up.
- You don’t like surprises.
Tenants can call at all hours of the night with emergencies that you need to handle. They can also, without notice, up and leave. This can leave you in a bind having to find new tenants at the last minute and having to perhaps seek legal action against the old tenants. If you value your free time and hate to be surprised, selling your home may be in your best interest.
Renting Your Home
Now, let’s look at some of the reasons that you might want to rent your home.
- You have no equity in your home.
If you owe more on your home than it is worth, it is probably advisable to rent it until that reverses itself. After all, selling it now would result in you having to come to the closing table with money. Renting your home for as little as one year could change your equity situation.
- You want to keep your home as an investment.
real estate is a great investment. Depending on what your current mortgage is, you could make a nice monthly income and have the added benefit of holding onto an appreciating asset.
Even if you do not make a few hundred dollars a month in profit, as long as the rent income pays your mortgage and any maintenance on the home, it may be a good idea to hold on to it as a rental.
- You are aware of current housing laws.
If you are well aware of all laws and regulations, it might be easy for you to rent your home. It will make everything less stressful knowing that you are fully compliant. It will allow you to properly prepare the home itself for rent and draw up a proper contract that protect you financially.
- You plan to move back into your home.
Perhaps you are taking a temporary job assignment out of your state. If you plan on returning, it can be a real pain to sell this home only to buy a new one a year or two from now. Instead, you might consider simply renting your home so that it will still be there when you need it again.
- You expect home prices to increase.
If you expect home prices will go up much higher in the near future, it may be a good idea to hold onto it rather than sell it. Maybe a large company is moving into the area and home prices are expected to soar, for example. This is a perfect situation where renting can result in a bigger profit for you in the future.
- You only plan on renting for a few years.
If you only rent your home for a couple years, you may still be able to qualify for tax savings. You only have to have had the home as your primary residence for 2 of the last five years to qualify That means that you could live in the home for two years, rent it for two years and then sell it with a large portion, if not all of the profit being tax free.
There is definitely a lot to think about before you make this decision. Honestly, for most of us, selling the home will be the right choice. Not everyone is cut out to be a landlord. If you are one of those people whoa re prepared for the headaches though, it can be financially rewarding for you.
Sit down, write a list of the pros and cons that apply to you and then make your decision. You might find it helpful to also consult with a realtor and a financial planner.