The pros and cons of renting out your house and what you should consider…
Are you suddenly being relocated? Or simply looking for a change? The question that follows is, what should I do with my house? You have two options: rent your home out as a Short-term Rental (STR) or sell it. According to Shyft, 9.8% of the population moves each year. That means a lot of relocating, a lot of moving trucks, a lot of homes being listed or rented, and a lot of decisions being made! With this being a highly personal decision, let’s look at some pros and cons of both and help you decide if you should rent your house!
Short-Term Rental Pros
Short-Term Rentals come with quite a few pros, one of them being additional income. If you can obtain a monthly rent that is higher than your mortgage, you can bring in additional income, which is always a plus! Another pro is the quick turnaround that comes along with listing as an STR. The process of listing, selling, and closing a house can take a while. If you are being relocated and need to move out ASAP, you’re in control of the timeline and can work your tenant’s move-in time around your move. You also have a safe place to land if you ever desire to move back. If you are renting your home out short-term, you can move back in if needed. It is always nice to have a place to come back to, especially if relocating is temporary. It also doesn’t hurt to know that you are paying your mortgage down while being gone! Lastly, you can ride out a bad market. If the current market that you find yourself in is not a seller’s market, renting out short-term helps you ride out the bad market and sell when it will be more profitable.
Now onto the next, the pros of Selling, and there are many! The first pro is the ability to obtain a sizable profit. The largest pro of selling a house is receiving the equity that you profit from the sale. Depending on your situation, you might need this money to purchase your next home. Receiving a lump sum of cash will not come from renting a home, even though you have the potential to make a profit each month. If you sell your house, you have zero landlord responsibilities. You are officially off the hook for things like mowing the lawn, repairing siding, and fixing a leaky shower. Your obligations to this home are void the moment the papers are signed at closing. The feeling of handing over your home to someone else is freeing, especially when it is followed by a profit! Another pro is the ability to have cash for another down payment. Making a profit from your home sale means a chunk of cash to use as a down payment for your next home. It’s much easier to buy your next home with the profit of a home sale than save for years and years.
Cons of Renting
Alright, we’ve talked about the pros of renting, now we must go over some cons. Perhaps one of the biggest cons of renting a house is the responsibility of being a landlord. Land lording is 24/7. You must always be available, depending on your lifestyle and availability, this can be deemed inconvenient for some. Another con is the cost of repairs. The positive of being a tenant is not being on the hook for anything that breaks. Did the dishwasher break? Not your problem. However, if you are the owner, the responsibility falls on you for fixing repairs both financially and logistically. Once again, this can be an added stress and responsibility. If you are leasing your house, you run the risk of having bad tenants. Evictions are costly and can cause a huge headache. There is no guarantee your tenants will pay rent on time and take care of your home as you would. It’s one of the main risks of renting.
Cons of selling
We have discussed the pros and cons of renting, now let’s talk about the cons of selling. According to HomeLight, it can take roughly three months from listing to close, in the process of selling a house. In some cases, it can be less, but you are looking around this time frame from listing to closing, depending on how fast your home closes. If you are prepared this is no issue! If time is not on your side, you might be better off listing as an STR to avoid any overlap of payments. The process of selling can take longer and, in some cases, not work for someone’s specific timeline. Another con, while unlikely, but still possible, is the potential of losing money on the sale of your home. Depending on your market, you might not land the sale you hoped for and end up losing money on your home. Timing is everything and this is all dependent on the market you are in. It is unlikely you lose money on your home if the market is strong and you’ve lived there a few years, but still a possibility.
Things to Consider
• Is my home in a good rental market? It’s easy to think of listing your home and seeing success. Before signing your first tenant you must consider if you are in a good area for renting. Is the demand for rentals high in your area? Pay close attention to the growth in your area and the demand for homes. If the demand is high and people are flooding your area, your home is likely a good candidate for renting.
• Is it a good time to sell? Find your trusted realtor and get a gauge on your market. Let them guide you in the best decision for the situation you’re in. If the market is thriving and you have a good shot to sell, go for it. You will never regret making a profit from your home.
• Can you swing being a landlord? As mentioned before, land lording is time-consuming and can be a headache. Is this a role you can take on? If life is hectic as is, land lording might not be a task for you. If managing things and people is right up your alley, then you’d be a great candidate to manage a rental.
Choosing between STR and selling can feel like a big decision, and it is! Take our advice into consideration and make the best decision for the situation that you are in. Whatever you decide, analyze your market, and let your realtor advise you!