Should You Rent Out Your Current Home For An Income Property Or Sell It?
Being a homeowner will typically bring a great sense of pride and accomplishment. It proves to yourself and others how disciplined you are to be able to undertake such a task. It also acts as a great investment property for your financial future. However, when life happens we may be stuck with a decision to keep it or to sell it.
Different Circumstances Lead to Different Results
Moving Away
Although different life events can lead to the same conclusions, it is good to know what some of these events might look like. One life event is having to move to another state for jobs. In this circumstance, it seems a wiser solution to sell your house. This is based on the logistics of managing a property in another state. If you are to keep it as a rental, there is always a chance you may need to come back to take care of some maintenance issues or other unforeseen items. There are also increasing problematic items if you are in one or two time zones away. However, if you ARE to rent it out, you can use the rent to pay towards the current mortgage every month as long as you have a tenant. Residual rent income may also provide extra funds to be applied to your new mortgage as well.
Loss Of Job
Moving to a different state or even to a different part of the current state is a happier circumstance. In some cases, it is not as happy. If you lose your current job or take a pay cut, you might be in a bind to make the mortgage every month. In this case, you might consider selling your house. However, many homes are tied to memories and it won’t be as easy to sell as you would think. Others may choose to rent their current home as a last chance to keep the memories alive. Thus, you can have someone else cover the cost of the mortgage while you downgrade to a smaller home or rent an apartment for less.
Which Should You Choose?
Renting
In both hypothetical situations renting seems like a viable option for the home-owner to choose from. However, it will ultimately come down to the person who is making the decision. If you are the type of person who does not want to deal with a potential headache dealing with tenants, then do not choose this route. In other situations, there are lingering issues with the current house such as HOA’s, poor rental location, etc. which can ultimately force the homeowner into selling anyway. If you are the type of person who wants to have a residual income property, there is a help. Property management companies provide a service to homeowners who wish to turn their current home into a rental. This is done through a monthly fee, but it should be minimal.
Selling
For each of the scenarios, there is also the option to sell the home and get some immediate cash. This is going to be ideal for those who may need the additional cash for the purchase of a new home or for the use towards debt. Those who are dealing with a considerable amount of consumer debt may choose this option over renting it out. Having consumer debt is a hard burden to deal with every day. Elimination of most or all of it would be worth more than having a small amount of extra income every month. Again, it resides in the needs of the owner. Renting may be a better long-term strategy if there is minimal debt, or if the debt is more manageable.
My Opinion
Although I would want to say I would choose to rent every time, I cannot say that with certainty. This is simply due to previous decisions I have made. I chose to build a new house after my career began to take flight. The new home was less than twenty miles away from the old home, and there was no need to sell it due to financial difficulties. At the time of our house being built my wife and I met with different management companies locally to rent out the current property in hopes to begin our investment property portfolio. Unfortunately, we would only break even every month. Thus, we decided to eliminate what little consumer debt we had left and start fresh in the new house. I still cannot say for certain what I would do when the option presents itself in the future, but right now I would choose to rent. I like my current home and would never want to see it sold off.