When you're faced with the situation of leaving your current house and moving into another one, you'll have a couple options which you'll need to consider. In the majority of cases, homeowners opt to sell the current home outright, so the sale cash can be used toward moving into the new one. However, some do decide to keep their old home and make it available as a rental, and this can be especially appealing if you have a strong local rental market. If you ever happen to find yourself in this position, here are some things you should consider.
What is the local rental market like?
In some areas, rental prices are so strong that they can completely cover your mortgage payments on the new home, and it might even cover your homeowner’s insurance and property taxes. By researching the local rental market and comparing your house with similarly sized houses in the area, you should be able to get a ballpark figure on what it could rent for.
You should also pay attention to how quickly homes like yours are leased out, because if that stretches out into weeks or months, it may not be to your advantage. You should consider the sale price which could be generated by your home if you were to sell it outright. If the local buying market is somewhat depressed, it may be to your advantage to rent out the house for a couple years until the market perks up and housing prices increase.
Would you return to this original house?
If you're moving to a new home because you need more space to raise a family, it's entirely possible that you would want to move back to your original house after your children have grown up. In a situation like this, it could be beneficial to have a good tenant taking care of your home for a few years, so that when you're ready to move back to it for retirement, it's still in great shape. In the meantime, you will also have the income from the rental property, and you'll continue to build equity in both the old home and the new one.
What about being a landlord?
There are some definite appeals to leasing out your home to a tenant and earning passive income, but you should consider whether or not you want to be a landlord for the period that you rent out the place. Remember that landlords are responsible for making any kind of repairs on the house, including structural damage, broken pipes, failing HVAC systems, and any other kind of maintenance which needs to be performed. You may find that you need a stash of several thousand dollars in order to be prepared for these kinds of eventualities. There are actually laws governing the responsibilities of a landlord, and you have to be aware of these so that you don't run afoul of them.
Do you need the sale cash?
If you need the money from the sale of your old home to place a down payment on the new home, this may trump all other considerations. If you are able to manage the down payment on the new home without selling the old one, then renting out your previous residence would make a lot more sense. Before considering anything else, work out the economics of your situation, so you will know whether or not you require the money from the sale of your old house.
If you are looking for some additional tips or help making the decision to sell to rent out your home, please reach out to us.
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