Buyers Information

Renting vs. Selling

It’s no secret that the real estate market can be temperamental. When homeowners find themselves unable to sell at their desired price point, many turn to the rental market as a way of cutting the costs while waiting for the market to pick back up. Depending on your current situation, renting your home out may be a viable option. There are a number of pros and cons to consider:

Advantages

  • Rental income can cover some or all of the mortgage payments, that way you won’t have to cover the entire amount each month. You might even make a profit if your monthly expense is low enough.
  • You may be able to continue to build equity at the expense of the renter — especially if your particular market is not affected or minimally affected by the slowdown. If your mortgage has been in existence for a number of years, more of the payment may be being applied to principal, so every payment is eating into the amount owed at a faster clip.
  • Landlords gain tax advantages in addition to the regular deductions of mortgage interest and taxes.

Disadvantages

  • Mortgage payments must be made even when the property is vacant.
  • Costly repairs and maintenance work cannot be delayed if it inconveniences the tenant.
  • Disputes with tenants over tenant rights and unpaid rent could require legal representation and legal fees.
  • State, local and federal statutes must be understood and followed, with failure to do so often resulting in fines.
  • Business costs. As with any business endeavor, there are expenses you can expect upfront, such as renovations or repairs prior to a tenant's move-in date and advertising. If you plan to use an agent to assist in filling your vacany,
  • Possible property management or Realtor fees. You'll have to consider how much contact you'll want to have with renters. A property management company, which typically charges between 3 percent and 10 percent of the rent, will act as an intermediary between you and your renters. Many real estate agents also handle rentals for a fee. A property manager can collect the rent, find and prescreen tenants and handle maintenance contracts as well.

For a read on what renting out your home vs. selling would look like, please see the calculator.

*Some content provided courtesy of bankrate.com

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