Deciding whether to sell your current home or rent it out is something that cannot be done in a hurry. After all, there is so much that has to be considered.
Selling a house will bring in immediate money that can be used to buy your next property. But owning rental property brings in long-term income. Do note that being a landlord does have its own sets of responsibilities and headaches.
You need to know your financial standing. In case you plan to hold on to the house, you will need two mortgages. You will need one for your present house and one for the new one you are buying. In case you have owned your house long enough, there may be enough equity for you to pay off the balance and make you free and clear. Also, you may have to consult a mortgage adviser like Multifamily Leasing Technology to know if you will qualify for another mortgage on the present and the future home that you will be living in.
The return on investment has to be done in the case of a rental. Do check out the local rental rates. See if there is a viable tenant stream. In case you are dependent on the rental to cover the mortgage on your new home, make sure that you are able to charge that much. Also, a rental will have its own expenses. These would include maintenance, repairs, along with property management. Besides, there may be times when the house is vacant between tenants. In case this total monthly expense amount exceeds the rental market value, it may lead to a monthly loss. But there is another point here. The rental value may be less today, but it may increase in the near future. Even that must be taken into consideration.
The potential tax benefits are another consideration. Hence there are various costs that one can write off. These would include mortgage interest, property tax, besides operating expenses, depreciation, as well as repairs. In most states, these costs can be considered as tax write-offs. Also, fees associated with running the rental can be written off. This would include fee with regard to property management, attorneys, as well as cleaning services.
Your old property may appreciate depending on the market conditions. If the value of the home is rising steadily, it may be better to hang on to it even if it means accepting a potential monthly loss as you keep your investment.
Look into comparable trends in the neighborhood in order to evaluate this long-term outlook. And consider if you would potentially make much more by investing the money got by selling the house, elsewhere. This can be in the stock market or such other retirement vehicle.
Give your house on rent only if you can actually oversee the rental. There is a lot of stress that comes with taking responsibility for the home that you are living in and looking after a rental too. Besides, looking after a long-distance rental is not easy.
Do conduct due diligence with regard to the licensing and such other laws pertaining to rentals in your city, or county, as well as state.
You may like to sell because you are relocating. This can be for work or personal reasons. But there is always the possibility that you may wish to return to be near your family or friends. It may be difficult to buy a house later.