If you are planning to move or buy a house for the second time either for a bigger space, for a better location like, or for upgrading to a luxurious one, you probably are confused about whether to sell your existing house or to put it up on rent. To make this important decision you first need to consider various factors involved like the objective of making the move, whether is permanent or temporary, your financial situation, and the market conditions.
Let’s take a look at the important factors to consider while making the ‘sell vs rent’ your home decision
Duration of the move
If your move is not permanent and there is a possibility of coming back, then it is better to rent out your home for few years instead of incurring the cost of selling the house and buying a new one. By putting your house on rent, you always have the option to move back and save on the agent fees and other transaction expenses.
Profitability involved
One of the most important factors to consider is the potential profit involved in both cases. In-case of renting out the property- is the property generating positive cash flow? Once it is up for rent, is the monthly rent generated is more than the expenses like maintenance, taxes, insurance, etc. If there is no positive cash flow or negative cash flow, then consider selling the house. The next step is to weigh the profit in case you plan to sell the house- if the market is up and you are getting a fair price of the property then consider selling the house and you could invest the profit in something else that may provide good returns. In case the profit is marginal or low as compared to the positive cash flow you are getting from renting, then hold the property for a while and wait for the market to rise.
Future potential
Gauge the potential of the house and the location in the coming times five to ten years. If the future looks bright in terms of infrastructural development, job opportunities, quality of the neighborhood, etc. then it’s best to hold the property and put it up on rent in the meanwhile and vice-versa. Analyze the current trends in the locality and anticipate the future growth of the area for making the best call.
Rental responsibility
Finally, ask yourself if you can take up the responsibility of being a landlord and have the potential to invest time and money in the process. Consider factors like distance and handling the rental remotely, time to deal with day to day issues or emergencies, etc. Also, the condition of your home plays an important role while putting it up on rent. It is important to strike a balance between your time and financial investment for being a landlord and have the mindset to earn through it.
Besides the above factors, there are various other miscellaneous parameters like taxes on rental income or capital gains and market situation. Consider all the factors and risks involved while choosing between selling and renting your house. Finally, make the call that is best suited to your needs and financial situation.
