When you’re ready to move, deciding what to do with your house is a big financial and personal decision. Should you sell and put the money toward your next home, or keep the property as a rental with the goal of building long-term wealth?
You are not alone in weighing both options. In the Zillow data cited for this discussion, about two-thirds of sellers, 66%, considered renting their homes before listing. Nearly a third, 28%, took that possibility seriously. The comparison showed an increase from an earlier figure of 47%, fewer than half.
Those figures show that other homeowners have wrestled with the same question. They do not tell you which choice fits your house, finances or lifestyle.
The better place to start is with three questions: Would your house make a good rental? Are you ready to be a landlord? And do you understand the costs?
Is Your House a Good Fit for Renting?
Before focusing on rental income, take a practical look at the property itself. A house you enjoyed living in still needs to be evaluated as a potential rental.
Think About Where You Will Live
If you are moving far away, managing ongoing maintenance could become a major hassle. Ask yourself how involved you want to be when something needs attention and you are no longer nearby.
A property manager can ease that burden, but management comes with a cost. Include that expense in your decision rather than assuming you will handle everything yourself.
Look at the Neighborhood and the Condition
Consider whether your neighborhood is a good fit for rentals. This is a useful question to discuss with a real estate professional before deciding to keep the house.
Then look at its condition. Does it need significant repairs before tenants could move in? If so, think about whether you want to take on that work while also preparing for your own move.
If distance, neighborhood fit or major repairs make renting difficult, selling may be the more practical choice. The point is not to rule out renting immediately. It is to be honest about what the property would require.
Are You Ready to Be a Landlord?
Managing a rental involves more than collecting a monthly payment. It can be time-consuming and challenging, even when the idea of keeping the house sounds appealing.
Maintenance calls may come at any hour. You may discover damage that needs repair before another tenant can move in. Tenants may miss payments or break their leases, creating unexpected stress and financial strain.
Ask yourself whether you want these responsibilities, not simply whether you want the rental income.
Be Honest About Repairs and Stress
Redfin puts the repair issue plainly:
Landlords have to fix things like broken pipes, defunct HVAC systems, and structural damage, among other essential repairs. If you don't have a few thousand dollars on hand to take care of these repairs, you could end up in a bind.
That is worth considering before you commit. If a repair call came during your move, would you be prepared to deal with the work and the expense?
Also consider how comfortable you would be with missed rent or a broken lease. These are possibilities to plan for, not outcomes to assume will happen.
Understand the Costs Before Counting the Income
If passive income is your main reason for renting, look carefully at the expenses that come with it. The rent payment is only one part of the decision.
The Bankrate guidance cited in the original discussion identifies the following costs. Use its estimates as planning references, not as a promise of what your particular property will cost.
Mortgage and Property Taxes
You still need to pay the mortgage and property taxes, even when rental income does not cover them. Ask whether you are comfortable carrying those expenses when the rent falls short.
Insurance
Bankrate describes landlord insurance as necessary coverage for damages and injuries and says it typically costs about 25% more than regular homeowners insurance. Include that difference when reviewing the rental option.
Maintenance and Repairs
Bankrate’s planning guidance is to allow at least 1% of the home’s value annually for maintenance and repairs, with more for an older house. Keep this expense separate from the question of whether the house needs work before the first tenant moves in.
Finding a Tenant
Finding someone to rent the property can involve advertising costs and potentially paying for background checks. These expenses belong in your plan alongside the ongoing bills.
Vacancies
If the house sits empty between tenants, you lose rental income while still needing to cover the mortgage. Think through how you would handle that gap before relying on rent to cover the property’s expenses.
Property Management and HOA Fees
A property manager can reduce the burden of managing the rental. Bankrate’s cited estimate puts that charge at about 10% of the rent. If the property has homeowners association fees, include those as an additional expense, too.
Compare Both Options Against Your Goals
Once you have considered the house, the responsibilities and the costs, return to your reason for moving. What do you want this decision to help you accomplish?
- Consider selling if you want to use the money toward your next home, or if managing the property and preparing it for tenants feel impractical.
- Consider renting if keeping the house fits your long-term wealth goals and you are willing to take on the costs and landlord responsibilities.
- Look more closely before deciding if your plan depends on overlooking repairs, management fees or time without a tenant.
Neither option should be chosen just because other homeowners are considering it. Your financial goals and the amount of responsibility you want matter more.
Your Next Step
Write down the known expenses, needed repairs and responsibilities of keeping the house. Then compare that picture with selling and using the money toward your next home.
Review the pros and cons with professionals who can help you make an informed decision. A real estate agent can be a valuable source of advice about the property. Reach out to Ed Parcaut to talk through your next-home financing questions as you weigh selling against renting.
