When it comes to deciding whether to sell or rent out your house, there are many important factors you need to consider. Much of this decision will depend on your long term goals, your current living and financial situation, your level of commitment, and your ability to work within time constraints. Before committing to either option, you must consider asking yourself these questions:
Should I rent out my house?
- How much time am I willing to put into the upkeep and maintenance of renting out my property?
- Am I planning on staying in my primary residence or is there a chance I could move again in the future?
- Am I underestimating the necessary costs needed to maintain a rental property?
- How will renting out my property affect my current financial situation?
- How much do I know about my rights as a landlord and the policies, taxes and insurance involved in owning a rental property?
- How much do I know about tenant rights and renting restrictions?
Should I sell my house?
- What is my home worth?
- How much should I list my home for?
- How can I sell my home at the highest price possible?
- Do I need a real estate agent or should I sell independently?
- What are the risks of buying a second home while renting out the first?
- What is the current condition of my home?
- What maintenance and repairs need to be done in order to sell?
- How long will my home potentially be on the market, and how will that affect my current living situation?
- Can I handle all the legal requirements and paperwork involved in selling?
Asking yourself these questions and being realistic with your answers will put you on the right track to making a well-informed decision.
The next step is, without a doubt, the most crucial factor that you must consider before making a decision – doing your research! Crunch the numbers and weigh the pros and cons of each option; that way, your conclusion relies heavily on facts rather than an unrealistic idea that you have envisioned. Here is a list of pros and cons to assist you in evaluating your decision:
If you decide to sell:
Selling means you transfer all your roles and responsibilities to whoever buys your home. It is common knowledge that owning two or more properties at once requires higher levels of financial stability and is a considerable time commitment.
- Generate a profit more quickly than renting it out over time
- Avoid the cost of renting and maintenance
- Avoid the stress of becoming a landlord and dealing with difficult tenants
- Freedom to relocate your current living situation
- Escape the potential for a dropping market
- Take advantage of current tax laws that may reduce or exclude your sale from the capital gains tax
- Covering the additional costs of a real estate agent, homeowners association fees, property taxes, attorney fees, transfer taxes, and title insurance
- Effectively timing the buying of your new home with the selling of your old home so that you aren’t left without a place to stay
- Potentially missing out on capital appreciation long term.
- Cost of repairs and upgrades to enhance your curb appeal
If you decide to rent:
Before considering managing a rental property, it is advised that you educate yourself on the process and study the local laws regarding rentals. You can find information about your local rental laws in Ontario here.
- Generate income while paying off your mortgage
- Cover most of the expenses, such as taxes and insurance payments
- Potential for an increase in the value of your home, ultimately increasing profit once you decide to sell
- Diversify your investments, which will, in turn, reduce your overall risk
- Holding onto a property during a low market recovery can prevent the negative impact of a short sale or foreclosure
- Covering the extra expenses you must pay if your tenant is late or skips out on payments
- Having to anticipate the risk of short term or long term vacancy in your rental property
- Committing time to the upkeep and maintenance of the property
- Dealing with potential liabilities of having a tenant in your home
- The reserve funds necessary to own more than one house is high
- Potential damages ensued by reckless tenants
- The possible eviction process can be costly
Speak with a financial advisor or mortgage specialist before you make your decision
The last step when deciding whether to sell or rent your house is to speak to a financial specialist. They can help determine if selling or renting out your house is right for your current situation. Get in touch with Mortgage Agent Leo Ragusa today for any advice or support when making your decision to sell or rent your home. He will guide you in the right direction and help you determine if renting out your house and getting a second mortgage for another property is feasible. You can also check out our rental property mortgages to see if this is something you would like to consider.