Should I sell or rent my house?
Moving? Calculate whether it makes sense to sell or rent your home.
Renting your house
The equation for renting your home would include:
- Your monthly mortgage payment, plus interest, insurance and taxes
- The amount you receive in rent
If you rent out your home, the difference between what you receive in rent and your mortgage payment would provide you with extra monthly income, in theory. But there are other costs to consider. Will you have to hire a property manager or maintenance person to look after the house? Will you have to pay a realtor to find a tenant every year for you? Will you be paying a mortgage on a new property as well?
The costs vary, but management companies can charge in the neighborhood of 10% of the rental income. Then take into account that there may be months when the property may not be rented if the tenants have moved out. You may have to repaint and refurbish the property between tenants, and replace costly items like dishwashers or carpets before you can rent it out again. There could be unexpected damage to the house, and you need to have enough cash on hand for repairs.
And of course, you would have to pay taxes on that rental income. There may be some tax deductions for owning the property, but you will need to calculate whether that is enough to offset the tax paid.
When you start to add up additional costs, you see it’s not always a simple case of what you can charge in rent versus what your expenses are now. The costs can be quite a bit higher when you’re renting out the property. But you may still be wondering, “Should I sell or rent my house?”
There are always some circumstances in which keeping your house as a rental might make sense. For instance, if your mortgage is paid off, the calculations may work in your favor. But in most cases, we generally recommend selling your house instead of renting it, and investing the proceeds.