Sell or Rent? What Should I do with My Home?
There are plenty of reasons why you might consider selling your home, especially in today’s market. Whether you need to relocate or want more from your current living space, there are plenty of reasons why you may be thinking about selling your home. Before jumping right into the next steps to sell, don’t overlook the opportunity to rent it out. While there’s plenty of incentive to sell in Canada’s hot housing market, there’s also an equally hot rental market you shouldn’t overlook as you decide to leave your current home behind.
What signals tell me to sell?
If you’re unsure of whether or not you should sell your current home, you might want to keep an eye out for these telltale signs that it’s time to move on.
You’re in a sellers market – Selling your home in a seller’s market is a great way to make a lot of money. The demand for homes outstrips the supply, so you’ll have more power when dealing with buyers. You can be picky about who you sell to, and what you want from them in order to close on the deal. This usually means that you’ll make more money up front than if you rented out your property over time, and that you won’t miss out on the immediate cash of a home sale in a lucrative seller’s market.
You can’t rent it for enough money to carry the mortgage – Renting your property can change it from a financial liability to an asset, but only if you can charge enough money. If you live in an expensive home within a high-value neighborhood, it’s unlikely you’ll be able to charge enough to offset your costs to hang onto it as a rental. If you’re unsure at a quick glance, take the time to do these calculations, and it’s likely that your findings will help you decide immediately whether to sell or consider renting.
You’re not cut out to be a landlord – Renting out your home means that you’ll have a new set of responsibilities. As the owner of a rental unit, you will need to always keep cash on hand to keep the property maintained, cover any unexpected costs, or stay afloat when the property isn’t being rented. You can be held liable for tenant or visitor injuries, so it’s critical to have adequate insurance. If keeping up to date with building codes/laws and finding and retaining good quality tenants seems daunting, it could be a sign that you aren’t ready to take on the extra responsibilities of becoming a landlord.
What signals tell me to rent?
If you can afford to keep your home and rent it out while you buy another, you should seriously consider this option before listing your property for sale. Even if this doesn’t seem like the best solution for you at first, keep an eye out for these signs that renting might be worth trying:
Demand for rentals is high – If you’re located near a post-secondary institution, in the core of a city or within an up-and-coming neighborhood, your location alone could be lucrative for renters. You could also be smack dab in the middle of a hot rental market if your area has seen growth in specific job sectors that will bring in new residents from other areas looking for a place to live. It’s no secret that rental properties in many cities are in limited supply, despite the fact that there’s an increased demand for options. If you’re not sure what the rental market is like in your area, start doing some research to see if it has the potential to truly pay off for you.
Your house offers something people want – While we most often move because our homes no longer meet our needs, that doesn’t mean they aren’t attractive to renters. If you know that your location and your property have a lot to offer, chances are renters will see that too.
This includes, but is not limited to a great school district, vibrant walkable area close bye, and modern renovations.
If it’s a buyers market – If the local home buying market is weak, you may want to consider renting your property so you don’t lose out on the future value it could bring to the table as the market strengthens. If you have the ability to keep your current home and rent it out while you buy another, you’ll continue building equity in that property, which means that you’ll have a better chance of profiting from it when the market changes.
It may take you several years to build up enough value in equity to equate with what you may get from selling in a seller’s market; however, by waiting for the right time for both buying and selling, you will see slow and steady growth rather than losing potential profits by selling in a buyer’s market.
The decision on whether to sell or rent out your home will likely come down to the financials. It’s a simple question of how much you can earn by selling your home versus how long it will take you to make that same amount of money renting out the property.
Then you’ll have to take into consideration what will be required of you as a landlord during that rental time period in order to better determine if you’re ready to take the dive into rental property territory or if you’re better off selling and moving on.
If you’re not sure how to approach buying another home or what financial commitment may be required of you, be sure to reach out to a mortgage professional for personalized guidance.
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