There are plenty of reasons why you might find yourself thinking about selling a house or renting it out. You may be moving up from a starter home or downsizing from a larger home. Or perhaps you’re relocating for a job, combining households, or inheriting a house from a family member. No matter what position you’re in, you have a decision to make. Should you sell the house or rent it out?
Before you make your decision, there are essential financial, emotional, and practical points for you to consider. And you’ll probably get plenty of advice from others too. While some people love real estate investing as a way to build wealth, others have no interest in at all.
Your smartest move? Listen to everyone and consider both sides — then do what’s best for you.
Reasons to Make the House an Investment Property
It’s easy to say you can just rent a house out; it’s another thing actually to do it. Although it may not seem like a big deal, from this point forward — stop thinking and talking about renting the house out. Using those words can minimize the work involved and the scale of the decision you have to make.
When you rent out a house for profit, you’ve started a business. You’re a landlord, the house is an investment property, and thinking about it that way may influence your decision. With your business owner “hat” on, consider the following and see if renting the house out still makes sense to you.
The Math Works
When it comes to running a successful business, math matters. Don’t make the mistake of assuming the rent will cover your costs. Or worse yet, simply hope down the road the house will generate positive cash flow. Instead, put in the work to understand the numbers now or you may make a decision you’ll regret.
To analyze potential cash flow, you’ll need to know a realistic market rent for the property and an estimate of what your expenses will be. Look online for comparable properties for lease. Or better yet, ask a realtor to do a comparative market analysis of your property.
When you estimate expenses, don’t forget to account for property management, capital improvements, vacancies…