Wednesday, June 9, 2021 / by Sonya Reiselt
It’s a question that has loomed over homeowners for decades: should I sell my home or take a chance and rent it out? While there are surely benefits to both, in the current market, you’d be hard-pressed to do as well financially by renting your home out, instead of selling it. While there are many pros and cons to both selling and renting, selling is almost always the best choice for most homeowners and here some of the main reasons why:
The current market is HOT for sellers.
There is no telling what the future holds for home values but one thing is for certain – the current market just can’t be beaten. If you’re between the idea of selling vs. renting out your home, this could be the sole reason why selling is the best choice. This is especially true for homes in high-demand areas such as the Lowcountry! Regardless of how long you’ve been in your current home, chances are you’re going to get a significant amount more than what it would typically sell for in other years.
Renting officially makes you a landlord, including all of the work that comes along with it.
Are you ready for the responsibility of being someone’s landlord? It’s no secret that this role, and all of the work that goes along with it, is not for most people. Being a landlord means being on-call 24/7 and having to maintain not only your physical residence but also your rental property.
While you might be making money initially off of monthly rent payments, you also have to consider the cost of taxes, unexpected repairs to the home, general maintenance and updates, and more. These extra costs add up quickly and, before you know it, you might be closer to breaking even than actually making a profit! Keep in mind that many say you should keep a liquid reserve of 3 – 6 months per property, just in case of unexpected issues! This is quite a large amount for most homeowners who are also saving for unexpected issues for their primary home.
This responsibility also comes along with communicating and dealing with tenants. While you can screen them as best as possible, there is always a possibility of ending up with less-than-ideal tenants in your rental property. That being said, navigating this situation can be difficult and isn’t suited for many homeowners.
You won’t have to worry about the potential capital gains taxes.
The longer you hold onto a second home, the more capital gains taxes you can expect to pay. However, thanks to the 1031 Exchange, tax laws state that a single homeowner can sell their primary home for up to $250,000 ($500,000 if you’re married and file jointly!) without having to pay capital gains taxes on it. However, this only applies to primary residences.
Your home could depreciate over time.
While it’s true that there’s the possibility of home prices continue to rise, it’s doubtful that the market will be this hot for sellers anytime in the near future. Based on your neighborhood, age of your house, school district, etc., your home could start depreciating before you know it, leaving renters wanting a lower rent then it’s worth, causing you to potentially lose money on the investment, not to mention making a sale that much more difficult than in today's market.
At the end of the day, it’s up to each homeowner to do what’s best for themselves and their family. While renting out a home can often sound appealing and financially rewarding, it’s important to keep in mind the state of the market. With the record highs that homes are selling for expected to continue into 2022, there has never been a better time to sell your home! And, while there’s no telling for certain what the future of the market holds, it’s safe to assume that, for sellers, it won’t be this rewarding for many years to come. So, don’t hesitate! In this market, you won’t regret making the choice to sell your home and skip the notion of renting it out.