Should I sell or rent my house? As a homeowner, one of the most important decisions you will make is whether to sell or rent out your property when you are ready to move on. It's not a simple decision, and it comes with many considerations and challenges. In this blog post, we will explore factors that should influence your decision between selling vs renting your property.
Tax Considerations for Selling vs. Renting
When selling your house, you have to consider the issue of capital gains tax. The Internal Revenue Service (IRS) allows for a capital gains exclusion of up to $250,000 for singles and up to $500,000 for married couples filing jointly. This only applies if you have owned and lived in the home as your primary residence for at least two of the previous five years. Tax breaks discourage people from renting out their homes because they may not get this offer after renting it out and deciding to sell later. It is advisable to sell your house if you are making a good profit from the sale rather than renting it out. If you rent out your home and decide to move back in, you must live there for another two years to enjoy the tax break on capital gains if you choose to sell.
When renting out your house, it is essential to consider that there are various tax perks associated with being a landlord. You can deduct a variety of expenses related to your rental property. These deductions can help reduce the tax on your rental income. Deductible property expenses include mortgage interest, property taxes, insurance premiums, repairs, maintenance, and utilities. Depreciation is allowed to the extent the home is used for rental purposes. The recovery period for a residential building is 27.5 years. You can deduct 3.5% of the property's value each financial year. The landlord pays for all improvement and maintenance costs on the rental property upfront. This can discourage some people from renting out their houses since they have to pay overhead costs upfront and wait for their annual tax deductibles later.
Costs of Selling vs. Renting
The other vital factor to consider is the cost of selling vs renting. If you're selling your property, you'll need to factor in the costs of real estate agent fees, closing costs, and any necessary repairs or upgrades to make your property more attractive to potential buyers. These costs can add up quickly and eat into your profit margin.
This being said, selling your current house can help you get the funds you need to buy a new place. Owning multiple homes can be very expensive and requires a significant amount of capital to maintain and repair them.
Is a Landlord the Right Move for You?
Being a landlord can be stressful, especially if you need to familiarize yourself with the process. It is vital to consider all the costs of renting out your house. Consider whether you could afford to pay for repairs, taxes, and property maintenance as a landlord. Consider that there are times when the property will be vacant, meaning it is not bringing in any rental income. This means you will have to cater for the mortgage fees from your end. Damages on your rental property can make you lose money. This is because you pay for all repairs to the property from your pocket. Changes in the real estate market, such as fluctuations in rental rates or property values, can impact the financial success of a rental property.
Evicting tenants who refuse to pay rent can be challenging. Some tenants are defiant, and you must force them off the property. Some tenants leave the property without clearing their rent leading to losses. Property taxes, insurance, and maintenance costs may increase over time, reducing the rental property's profitability. Charging tenants a security deposit before they move in can help avoid losses. This can help cover the property's damage cost when the tenant moves out.
Some landlords hire external companies to help them manage the property. These companies help you with the maintenance and repair of your rental property. Hiring these companies can be costly since they mostly charge a percentage of your rental income. Before hiring a company to manage your rental property, make sure you do some research on their fees and services to make sure they are worth your money. Having your lawyer look at the contract before signing it would be best. Make sure you understand their terms and conditions before signing the contract so you know what you are getting into. It also helps you in case you ever want to terminate their services.
If You Decide to Sell…
Should I sell my house or rent it out? If you decide to sell your house, first understand that it can be a timely process that requires expertise and research. Hiring a real estate agent to help you market your home and guide you through the process can help you close the best deal. A real estate agent will guide you through analyzing various offers and choosing the best deal. They also guide you through any legal documents required to conclude the agreement before signing them.
They can provide help and assistance with any tax issues that may arise from the sale of a house and help you sell your home faster. Real estate agents hold talks on behalf of the buyer and seller, easing the negotiating process.
BidMyListing can help you find a reliable real estate agent to help you sell your property. We connect you with professional agents who guide you through the sales process and negotiate on your behalf. Our listed agents are licensed and certified professionals with the knowledge and skills to help you sell your house.
Create your account with BidMyListing free of charge today to find the best real estate agent to help you sell your home. Our smart technology will automatically create a listing for you. All you are required to do is enter your address, confirm your property details, and a sales price for the home
Real estate agents will bid on your listing, so you can earn money while finding your perfect realtor. You can select your preferred agent according to the highest offer, experience in the field, or both. As the seller, you have complete control over which real estate agent you choose.
Deciding whether to rent or sell a house can be overwhelming. You have to consider all the factors involved on both sides before making a decision. If you decide to sell your house, listing with a professional real estate project can help ensure you get the best deal. Real estate agents can help you save time and money. Find your perfect local agent today with BidMyListing!
To learn more about selling your home, visit our Home Seller Resources >