There are a lot of things to consider when deciding if you should sell or rent your home. From the financial aspect to the personal aspect there is so much to think about. So it’s important to make an educated decision, one that may take some time to decide. Below is a complete guide that will help you determine what option is best for you and your family.
Get the Numbers!
In order to make an educated decision, you’ll need to obtain accurate numbers. So the very first step you need to take is finding out what your home will rent for in addition to how much it will sell for.
What’s Your Home Worth?
The best way to obtain how much your home will sell for in today’s real estate market is by contacting a top Realtor who specializes in your area. Do not rely on “estimates” you find on websites like Zillow. These numbers are based on calculations made by a computer, not by a person who’s actually seen your home. A Realtor will be able to review recent sales along with active listings and pending sales. Based on this information they should be able to provide you with a realistic sales price. If the price they suggest isn’t supported by comparable sales contact another Realtor for a second price opinion. Unfortunately, there are agents out there who try to “buy listings” and suggest an unrealistic sales price in an attempt to get the seller to hire them. The cost of this information is typically free.
Another option is to hire a real estate appraiser, the average cost is usually between $300-$500. If you decide to go this route make sure the appraiser is familiar with the area and standard adjustments. If they don’t their appraisal may not be accurate. In some cases, it could be below market value and in other cases, it may be above.
How Much Will it Cost to Sell Your Home?
One of the biggest misconceptions when it comes to selling real estate is the only cost is real estate commission. While real estate commission is one of the fees it’s not the only cost. There are closing fees, title fees, transaction fees, search fees.
The list goes on and on and these fees can add up to thousands, even tens of thousands of dollars. So it’s important to know how much it will cost to sell your home. A local title company or attorney’s office should be able to provide these fees, a lot of Realtors can too.
What Will Your Home Rent For?
Once again the best way to obtain this information is by contacting a top rental agent in your area. They’ll be able to show you the current competition along with what properties have previously rented for in your neighborhood. By analyzing what’s rented and what’s available they’ll be able to provide a realistic rental priced based on the condition of your home.
How Much Will it Cost to Rent Your Home?
Knowing your monthly overhead is key to determining if renting your home is a viable option. In order to determine how much your monthly overhead will be you’ll need to calculate your monthly expenses. These expenses usually consist of your mortgage, homeowners insurance, property taxes, lawn service, pool service and/or HOA fees. You’ll also want to include a buffer for repairs, which will more than likely pop-up and don’t forget about vacancies.
In addition, to covering your monthly overhead you’ll also have to pay real estate commission if you decide to hire a rental agent to find a tenant for your home. This is one expense that is well worth the money because you’ll be able to avoid the most common landlord mistakes. A top rental agent will do a full tenant screening; credit, criminal, eviction and income check on every prospective tenant to ensure you have a qualified tenant. If you don’t plan on managing the property, you’ll have to hire a property manager, which will be an additional monthly expense.
Examining the Numbers
Now that you have numbers you’ll be able to decide if renting or selling is even an option. If you sell will you walk away with money or would you have to bring money to closing? If you rent will all of your monthly expenses be covered or will you have to pay out of pocket. Some homeowners will have the luxury of being able to do both, but unfortunately, that’s not the case for everyone.Should You Sell or Rent Your Home? Tips & Advice for Homeowners
Things to Consider Before Renting
Will You Loss Money Renting Your Home?
While your standard monthly expenses are pretty cut and dry unforeseen issues are not. Never assume you’ll be “making” money if your expenses are $2,200 a month and you can rent your home for $2,500 a month. In the blink of an eye that $3,600 “profit” over the year can be flushed down the toilet if a mechanical item needs to be replaced. In fact, you may have to come out of pocket with money if something major comes up, like replacing a $5,000 HVAC system. Can you afford to cover the unforeseen?
Are You Prepared to be a Landlord?
Unless you hire a property manager you’ll be the point of contact. So when a repair comes up instead of receiving a bill from the property manager you’ll have to hire a contractor and deal with the tenant. Some tenants may not bother you too much throughout the lease while others may be contacting you non-stop. You’ll also need to collect rent and make sure the property is being maintained. Do you have a network in place to make repairs and ensure your property is being maintained properly?
Can You Survive a Bad Tenant?
If the tenant stops paying rent do you know what steps to take to evict them? Can you afford to carry the property if they stop paying?
If the tenant trashes the property and their security deposit doesn’t cover the damages can you afford to fix it? Sure you can take them to court, but that can be a long process and there is no guarantee you’ll ever get paid.
Can you deal with a needy tenant who calls you every time the smallest thing goes wrong? Some tenants may not call at all, even when things break. However, there are also needy tenants who will call when a light bulb burns out.
Can You Afford to Move Without Selling?
If you have equity in your home can you afford to move without it? If you decide to rent the equity will remain in the home unless you take out a line of equity, which could be very costly.
Can You Stick Around to Find a Tenant?
From list date to move-in date it can take several months to find a great tenant, can you wait to move until you find a tenant? If not all of the expenses will fall solely on you. The same holds true if your tenant doesn’t renew the lease and you have to find a new one. Occasionally vacancy may be minimal, but it quickly adds up as each day passes. Also, keep in mind if your home belongs to an HOA they will have an approval process the tenant must go through, which can take up to 30 days.
Is Your Home in a Rentable Condition?
A majority of tenants are picky and will have certain expectations when it comes to renting. Most tenants will expect fresh paint, clean or new flooring and updated appliances. If the home is in disrepair it may only rent at a deep discount or not rent at all unless major improvements are made, which can cost a good chunk of change.
Things to Consider Before Selling
Will You Make a Profit Selling Your Home?
After deducting closing costs spent to buy and sell the property along with your down payment will you be walking away with a profit? Have you calculated capital gains? Some people don’t care if they lose their down payment, they just want to sell and move, but others do.
Will You Ever Move Back?
If you plan on moving back to the area down the road it may be worth hanging onto the property. Buying and selling real estate isn’t free, in fact, it can be very costly.
Is the Real Estate Market Increasing?
Nobody knows what the future holds, but if the market has been a strong seller’s market for years odds are it’ll stay on that path and if anything turn to a stable market. On the flip side, if the market is starting to decrease selling could be the best option.
Trying to decide if you’re going to sell your home or rent it out is a big decision and one that should not be taken lightly. Not everyone is cut out to be a landlord, but in some cases that may be the only option.
Please consider spreading the word and sharing; Should You Sell or Rent Your Home?
Additional Selling & Renting Resources
- Staging your home is an important step when selling your home, but it’s also an important step if you decide to rent. Now, if the home is going to be vacant when you list it for rent there is no need to hire a staging company. However, if you plan on residing in the property until you find a tenant you should stage your home. Staged homes will always sell OR rent faster and for top dollar as opposed to homes that don’t show well.
- If you’re going through a divorce selling your home, as opposed to renting it out, might be the best option. That is unless you owe more than your home is worth, then your options are limited. You can rent your home out until property value increases, bring the shortfall to closing if you move forward with selling or see if you qualify for a short sale. Now, if you don’t make a decision and stop paying your mortgage you will be facing foreclosure, which should never be an option.
- There are several low-cost home improvements you can make before listing your home for sale or rent. Not only will these home improvements make your home look more appealing, but they’ll also help you sell or rent your home faster. Home improvements don’t have to cost thousands or even hundreds of dollars.
About the Author
Top Wellington Realtor, Michelle Gibson, wrote: “Should You Sell or Rent Your Home?”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres and more.