SHOULD YOU RENT OR SELL??
Tuesday, October 21, 2014
By Marcia Brinson
Typically, when one thinks about moving, the thought is accompanied with the idea of selling one’s home, but this is not always the only option.
Some people choose to rent their home out to another tenant instead. There are various motives behind this decision, whether it be that they are only leaving for a short period of time such as a year or two to pursue a graduates degree or the time it takes to finish a project away for work, or that they are waiting for the market to pick back up, so they can sell their home at an acceptable price.
No matter what the reasoning behind the decision is, it is important to understand the issues involved when weighing the options.
Renting your home out may allow you to cut costs while waiting out a real estate slowdown or provide means for you to have a home to return to if you are only planning on leaving for a defined period of time. However, financially there are some pros and cons to becoming a landlord.
- Rental income can help cover some of your mortgage payments or potentially lead to a profit if your monthly expense is low enough
- Although rental income is taxed s normal income, your tax bill could easily be eliminated due to deductions on expenses and depreciation
- You can keep the property as it appreciates
- Mortgage payments must be made even when the rental property is uninhabited
- Possible damages to property
- Potential legal or financial disputes with tenants
- Business costs
- You could be taxed on the whole profit if you sell
Becoming a landlord is a huge decision that will require a substantial amount of commitment on your part, but it does have its benefits. Before you pursue this option, it is important to consider all of the advantages and disadvantages and assess whether or not being a landlord is for you.
Although selling a house is usually thought to be a necessary step in moving to a new home, recently, with the real estate slowdown, many potential sellers have been suffering from sticker shock about what comparable homes are selling for in their neighborhoods. Selling does have its advantages over renting, though, and it is important to consider all of these factors.
- Selling leads to a likely tax-free capital gain
- With only one house to maintain, a certain simplicity comes with selling your home over renting
- Selling your home frees up equity that could be invested or rolled into your new home
- You could lose the potential property appreciation
- If you wish to return, it could possibly be priced out of market
- It could be a struggle trying to sell if it is during a bad time for real estate
If you have more questions or you or someone you know is interested in selling or renting their home, please contact us! 720-329-5803!!