Your current house might feel like home now but that probably won’t last forever. Eventually, you’re going to want to move on to another home, either by choice or due to one of many factors that come up throughout life. You might end up looking to upgrade to a bigger place, your financial situation might change, you might have a desire to start a family, you might have to relocate, or you might decide it’s time to downsize.
When that time comes, you’re likely going to have some things to consider, mainly around whether or not you want to sell your house or rent it out to someone else. Is it better to sell or rent your house? The answer comes down to what works best for you.
Renting the property out could generate rental income to help you pay the mortgage on the new house, but it also comes with the risks that accompany any rental property. Selling the house could generate a large sum of money to help you in the purchase of the new house, but selling on the open market brings with it a lot of costs and concerns.
Of course, you could also segue past all these potential risks and sell your house for cash to a home buying company like Avante Home Buyers. We buy Norfolk, VA houses fast, we pay cash for them, and we don’t involve middlemen like real estate agents or lenders. But if you’d rather choose between renting the property or selling your house, here are some things to consider in order to make the best decision for you.
What To Do: Rent or Sell House in Norfolk, VA
Should You Rent or Sell Your House
“Is it better to rent or sell my house?” This is the question at the center of the debate. If you want to know whether it’s better to rent or sell your house, there are some surefire ways to know for sure.
First and foremost, ask yourself if you want to own rental property. Doing so means you will become a landlord and that means you will be responsible for dealing with renters, finding new renters to replace old ones, dealing with issues and repairs that come up, potentially dealing with unruly tenants or evictions, and knowing how to handle property taxes related to a rental property. If you’re looking to do a short-term rental through a company like Airbnb or VRBO, you’ll also need to become very aware of local and state ordinances regarding these kinds of rental units.
In other words, there are a lot of things to concern yourself with beyond just thinking about the potential rental income that comes with owning a property. There are plenty of risks and potential costs you’ll need to be aware of and okay with. Check out a rent or sell your house calculator in order to get a good sense of the kind of income potential you can have, but also remember that potential is not the same as reality.
Another thing to consider is whether or not you can afford to buy your next house even if you don’t sell your current one. If you have the means, that might make it easier to consider keeping the current property as a rental unit. However, if not selling the current property would make it hard for you to put down a down payment (often 10-20 percent of the sale price) or pay for your next place’s mortgage (a couple thousand per month, for example), it might not make a lot of financial sense for you, especially if you can’t promise that you’ll be able to generate rental income quickly and consistently.
Things To Consider About Renting Your House
If you decide that you want to rent your house while also purchasing a new place, there are some things you’ll need to consider to make sure you’re aware of all the issues that come with owning rental property.
First and foremost, rental properties generate expenses. And even if you’re generating revenue, that doesn’t mean you won’t have to pay a lot of money in order to maintain it. Some of the expenses you can expect to pay include a mortgage, property insurance, any repair costs, property taxes, any HOA fees, management fees (if you hire a property manager), commissions (if you work with a real estate agent to fill units), and other miscellaneous costs like credit checks on prospective renters. And of course, don’t forget to consider the cost of vacancies. Every month that a property or unit sits empty is a month without revenue to cover these costs. Are you able to weather that if it happens for a prolonged period?
Second, consider how comfortable you are with being a landlord. If you rent your property, you are responsible for who lives there and how the place is maintained. Even if you happen to get amazing tenants, you’re still going to have to deal with their demands, maintenance needs, concerns about the lease, etc. Sure, you can hire a property manager to deal with a lot of this, but that also means paying out more money to them for the service. At best, you’ll still be on the hook for maintenance and yearly repairs. At worst, you’ll find yourself dealing with legal drama around evictions or worse.
Third, are you considering coming back? One of the reasons to rent your house after moving is because you think you might want to return to living there one day, or you’d like to give the house to a family member at some point. Renting the place until then can be a good way to generate income and make sure the house remains in decent shape until then. Of course, you’ll have to make sure the tenants are either aware of this or leave when their lease is up. You want to do your best to be fair to everyone.
Finally, don’t forget to consider taxes on a rental property. While a rental property does give you the chance to write off a lot of costs associated with it, you will still be taxed on it and therefore need the finances to pay for anything incurred. Since it’s a rental property you won’t have the luxury of benefitting from any kind of capital gains tax loophole and if you end up with a profit loss on the property you could find yourself unable to cover any potential tax burdens.
Things To Consider About Selling Your House
If you are considering selling your house as you move to a new one, there are some things that come with that as well.
One of the top reasons to consider selling property is that you get to walk away and not look back. There’s something very satisfying about selling a house, getting the money, and then being able to move on with your life in your new home. You don’t have to be burdened with any costs or concerns related to the property, it’s someone else’s concern now. And if you’re going to move to a different state or far away, the emotional toll of having multiple properties in different places can often be very stressful. You can cut all that stress out by selling your house fast to a cash buyer.
Next, by selling your house fast, you avoid any potential fallout from bad housing markets ahead. You never quite know what the housing market has in store for us as national and Norfolk housing trends change all the time. What might be a house that generates a lot of profit for you now could be a house that you end up taking a bath on in just a few months. Given the state of things with the pandemic and economy, it’s hard to predict what we have waiting for us in the coming months and years. Sometimes it feels better to just sell and walk away.
Third, there are some real tax benefits from selling your house that you can take advantage of. Current tax laws allow you to exclude as much as $250,000 (individual) or $500,000 (married) from your capital gains tax on the home sale. There are limits and qualifiers you need to meet, but most homeowners would be able to get a very sweet exemption on their tax bill by selling a residence they called home. And you never quite know if and when the tax laws might change so it could make a lot of sense to take advantage of that now.
Finally, by selling a house, you won’t need to worry about dealing with tenants. Some tenants are good but you can also get some pretty bad ones. It’s not uncommon to have to deal with late rental payments, evictions, damage, and much more. Because of some renter’s rights, you can also run into some uncomfortable situations where you can’t make someone leave even though they’ve done something to cause eviction proceedings. So it might just be better to avoid headaches like that altogether.