Should I Sell or Rent My Former Home

When you own a home and are planning to move, the idea of renting the home you are leaving does not cross many people’s minds. For some, it may not be an option as they may require the money from the sale of their former home in order to make a down payment on their future home. Banks may also be unwilling to grant a mortgage to a person who is still paying a mortgage on another property. However, it is possible in some cases where the property owner already has tenants lined up and can prove to the bank that they will be able to cover the mortgage.

Let’s assume for now that renting is a feasible option and look at the relative merits or renting vs. selling:

Selling

• Selling your home does not involve the same long-term commitment as being a landlord. This refers not only to the commitment of managing the property and dealing with tenants, but also the commitment of having to pay the remaining mortgage on the property.

• If other homes in your area have been selling well, selling is a good way to capitalize on this and may earn you more money than years of renting.

• Selling can represent a lower risk than renting as it is a guaranteed one time financial gain, rather than renting, which can sometimes lead to sporadic periods of payment, not necessarily steady income.

Renting

• If the real estate market is not doing so well, then this may be a good reason to rent for two reasons. Firstly, you may not get the maximum value for your home if you sell at that time and secondly, more people will be looking to rent during this time.

• Conversely, if house prices are on the rise and are projected to do so for the foreseeable future, it makes sense to rent the property while its price continues to rise.

• Renting can be a great way to supplement your income and can represent a steady reliable income stream.

• Rental property can depreciate over time, which will lower taxable income. However, this usually has little to do with the actual property value. This means that over time, an owner could end up paying no taxes on the money they make from the property and could still sell it later on for another financial gain.