Renting vs. Selling Your Home: What Option Makes Sense in This Market?

The difficult housing market has many homeowners rethinking the idea of selling their home. In fact, many homeowners, concerned that they will not see a return on their investment, have begun renting their homes instead.

The pressing question, therefore, is: should you rent or sell your home in today’s market?

The answer to this question is highly individualized, as what works for one individual may not work for another. The best way to first determine whether to rent or sell your house is to evaluate both the pros and cons of each option. 

Pros of Renting your Home

• You can hold onto your property until the market has improved and your property has appreciated. If you have seen property values decline significantly in your area over the last year or so, it certainly doesn’t make sense to sell (unless you have to) and lose any profit you may otherwise appreciate if you simply wait for the market to rebound.
• The tax breaks you would receive may offset some of the income taxes you would pay to rent the home.
• Your rental income could cover your mortgage payments, thereby freeing you up to move on without first selling your home. If you are able to secure a renter that is willing to pay what your mortgage payment is each month (or close to it), then you can go on to rent or purchase another home without the financial burden of two house payments each month.

Cons of Renting your Home

• You must find renters for your home, which takes time and may cost you in the form of advertising.
• You may have “problem” tenants that do not pay the rent or damage the property; as a result, you may have to go through the eviction process and attempt to recoup your expenses by suing them.
• You either must act as a landlord (and receive phone calls in the middle of the night about a leaky water heater) or you must pay someone else to take on this task, which will therefore cost you more money each month.
• Your home may get damaged by renters, which will likely cost you more when you go to sell or rent to another individual.

Pros of Selling your Home

• You are rewarded with tax-free capital gains to put towards a new purchase.
• You can access the equity in your home for investment purposes or to purchase on a new home.
• You aren’t bothered with the headache of maintaining two homes, collecting rent and dealing with tenant problems and issues.

Cons of Selling your Home

• In today’s market, you may lose money on your home when you sell.
• You may have to accept a lower offer in order to sell.
• You may be unable to sell quickly, which may leave you in a precarious position, particularly if you’ve taken on another mortgage payment or rent payment.

Clearly, there is no one-size-fits-all solution to the question of renting vs. selling your home.  It is important to carefully evaluate your financial situation, as well as the current market valuation of your home, in making the decision between selling or renting out your property.