Should you sell or rent your house?
Sometimes, moving is inevitable. Whether you own your home or are still paying a mortgage, a time may come when you suddenly have to move. Keep reading on to learn more about whether you should sell or rent your home.
The Facts of the Market
As of July 2016, the median price for a single-family home in the U.S. is just over $244,000, according to the National Association of Realtors. That’s up 5.3 percent (or about $13,000) from the same time last year. That increase is pretty indicative of the trajectory of home prices over the past several quarters. It’s safe to say home prices are rising. As of July, median monthly rent in the U.S. for a 2-bedroom dwelling was $1,300, according to Apartment List’s National Rental Price Index; that’s up 0.3 percent from the same time last year.
While these numbers tell us a lot about the state of the national market, they’re broad stroke figures. If you’re seriously torn between whether to rent or sell your home, the first thing you need to do is to think locally.
Local Mind
After the 2008 crash, the national market was so badly and thoroughly splintered that even today in big markets city-wide stats are of little use because conditions vary drastically across neighborhoods. If you’re working with a real estate agent, you need to use them as your best source of information. An agent can help you find the true market value of your property and can also advise on how much rent you could expect to receive for your house. You can also use a tool like Rentometer for local rent comparison.
A Few Questions to Ask Yourself
Before you entrench yourself in the numbers, there are a few basic questions that will help determine what direction you’ll want to go in:
WILL YOU BE BACK?
Plenty of families will pack their bags and never set foot in whatever neighborhood, city or state they’re leaving, but plenty will. Maintaining a rental property is simply an easy way to make the move back.
CAN YOU TAKE ON A SECOND JOB?
Being a landlord has a lot of responsibilities – chiefly among those is repairs. Can you fix a water heater or a broken toilet? Do you have the time to field complaints and concerns, and then translate those to a professional if you’re ill-equipped or unable to make the repairs yourself?
DO YOU HAVE THE HEART FOR THIS?
If you rent out your home, your name may still occupy the title, but a family will occupy the property. Your bedroom will become their bedroom. Their children will play in your backyard. Their cars will fill your garage. In almost every sense, that home will be theirs. But if they come on hard times and can’t make rent, it won’t be a faceless bank that kicks them out. It will be you.
So You Want to Sell Your Home?
Maybe you answered no to one or all of those questions, and you’re thinking about selling. Something you might want to first consider is the rate of appreciation in your local market (i.e., are homes in my area going up in price, and will they continue going up in price for the foreseeable future?). If you’re in a down market or on the cusp of a booming one, it might make more financial sense to rent your home while you wait for the market to peak (and allow yourself to get the biggest return on your original investment). On the flip side of that, if your local market is slowing down, now might be the perfect time to sell. You don’t want to hold on to a property that’s losing value.
If you ultimately decide to sell, the process, though complicated and work intensive, can be handled by a local real estate professional.
So You Want to Rent Out Your Home?
The real headache of renting out your home is playing landlord, because when repairs are needed it will take both your time and money. And this should be the biggest factor in determining whether to rent or sell: Will renting your home make you enough money to pay for the mortgage and repairs?
Experts say landlords should expect yearly repair costs equivalent of 1 percent of the property’s total value. So a $240,000 home would require $2,400 in yearly repair costs. If local rental rates don’t allow for the costs of a mortgage on a $240,000 ($1,135 assuming a 3.92 percent interest rate and a 30-year FRM) plus the additional $200 monthly repair fee, it’s not worth renting.
An easy way to determine the financial viability of renting your house is by using an online tool like this one.
If you discover renting is feasible, and you have the time and temperament required of a landlord who may have to one day evict a family, a real estate professional can help you through the process.
Courtesy of Central Properties
PC: iStock