"List or Lease?": Factors to Consider When Deciding to Rent or Sell Your Home

"List or Lease?": Factors to Consider When Deciding to Rent or Sell Your Home

With the craziness of this year’s market, you may be wondering if you should sell now. We don’t have the answer for you per se, but there are a few factors you may want to consider when evaluating your situation. Many people often ask: is it better to rent or sell? And the answer will depend on quite a few variables. 

Here are some key factors to consider if you’re leaning towards renting:

1. Sentimental value- Let’s start with matters of the heart. If you have an attachment to the area in general or the home itself, but you’re seeking a new job opportunity elsewhere or life is pulling you away for the moment, but you’ll likely return, you should rent. This way, your house is there waiting for you when the timing lines up later or while you venture away. If you’re sticking in the area, but have outgrown the house but have future plans, this is a great investment as well. You could act as your own property manager and landlord. If moving away, you can seek assistance from a rental management company or Realtor® in the area. 

2. Supply and demand- Your property may be in an area where there’s high demand for rentals. If you live in a college town, an up-and-coming area, close to a military base or a transient area in general, or a city with booming job growth, you’ll likely be able to find renters easily. 

3. Amenities, amenities, amenities- Your house or apartment might come with some key amenities that are appealing to renters. You may have a park or greenspace nearby, be close to public transportation and good schools, you might allow pets in your home, have ample and convenient parking for guests, and extra space for families or storage. All of those factors are highly desired by renters beyond the main factors of location and price. 

4. “Money, money, money… MAH-NAY!”- Many people rent for some extra money. While you’re building equity in your home and paying down or paying off the mortgage, you could potentially make extra money for retirement or additional investment opportunities, bank some funds in a travel account, or add to a college fund for your kids. Generating cash flow, making a passive income, and, yes, even cashing in on some tax breaks all will quite likely lead to a positive return on investment. There are certainly costs to renting and repairs to budget for, but you should see a nice ROI if you do your due diligence and complete background checks on your renters. No matter how you look at it, more money coming in is always a positive and may allow you to have more freedom and flexibility in other aspects of your life. 

On the other hand, you may be leaning towards selling as well. Here are some key facets that may convince you to sell: 

1. “Money, money, money… MAH-NAY!”- Yeah, we know we just put this as a positive for renting, but it is guaranteed cash in your pocket NOW for selling. The market is en fuego! There aren’t a ton of listings or houses for sale right now. The demand is definitely there to make a nice chunk of change on your home if you decide to sell right now. If you do the basic steps right, you’ll likely receive multiple offers and have the better cards in your hand when it comes to negotiating as well. Wherever you are in the U.S. right now, you’re very likely to walk away with above asking price and can cash in on your home equity. 

2. You’d have to charge more than its worth- When homes increase in price, the return of rent decreases. The gross rent multiplier (GRM) is a key ratio when determining how much you’d have to charge in rent in relation to the overall value of your home. If your home is older as well, you’d want to account for extra maintenance fees when crunching your numbers and determining rent. At the moment, you may also lack the cash or liquid funds for property management fees, taxes, and other hidden costs of renting. 

3. It’s not a great rental property- Maybe your location doesn’t meet the needs of a family or you wouldn’t be comfortable with pets. The properties that always get leased have many of the desirable amenities mentioned above. When push comes to shove, “great rental” just may not describe your property, as much as you want it to be characterized as such.

4. Risk of poor renters- Even if background checks do pan out and your renters have good credit, they could still do damage to the property-- or their friends could. As lucrative as renting sounds at times, it is still a risk-- especially if you’re renting on your own and not using an established property management company. While there are legal options when renting goes awry, that may be more stress than it’s worth. 

The bottom line: weigh your pros and cons and consult a rental property calculator and your most trusted real estate agent to bounce ideas off of them-- we know quite a few awesome ones who can help you decide whether to list or lease!