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Should You Rent Out Your House or Sell?

I own several rental properties, and I recommend anyone with the financial ability to have at least one rental property in their overall investment portfolio – after you buy the home you live in, of course!

If you already own a home and you’re considering renting out vs. selling it, there are several things to consider:

  • Financial Goals – Consider your short-term and long-term financial objectives. If you need immediate cash for a different investment or financial need, selling the house might be the better option. On the other hand, if you’re looking for a source of passive income and potential appreciation of the property value, renting it out can be beneficial.
  • Market Condition – Depending on the market condition, such as supply and demand, interest rates, economic outlook, and personal finance outlook. The decision to sell vs. rent could swing one way or the other – this is something that I can review and personalize for you.
  • Cash Flow – Research the local rental market to understand demand, rental rates, and potential vacancies. A strong rental market with high demand may make renting a viable option. When considering renting vs. selling, an easy rule of thumb is that if rent covers your mortgage and HOA/Condo payments, the property can be a decent rental.
  • Long-Term Asset – Even if your house doesn’t pass the Cash Flow test above, it might still be a good financial decision to keep it as a rental. I can help you with this analysis.
  • Handling Management Responsibilities – Owning a rental property comes with responsibilities, including maintenance, repairs, dealing with tenants, and potential legal issues. Make sure you are willing to take on these responsibilities or can hire a property management company to handle them for you.
  • Tax Implications – There are many tax benefits to owning a rental property, but one of the main factors is tax exemption when selling a primary residence. If you are sitting on a substantial amount of profit, you might be better off selling (or selling within the first 3 years of when you first moved out) to take advantage of the $500k capital gains tax exemption.  Consult with a tax professional to understand the tax implications of both options.
  • Personal Circumstances – Your personal situation is crucial in making this decision. Factors such as your future housing plans, potential relocation, and overall financial stability play a role.

Ultimately, there is no one-size-fits-all answer. Take the time to evaluate the pros and cons of each option and consult with financial advisors, real estate professionals, and tax experts to help you make the best decision for your specific circumstances. I highly recommend that we set up a consultation session to discuss your specific situation.

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