Investing in real estate has always been a reliable way to generate wealth. As Andrew Carnegie is known to say, “Ninety percent of all millionaires become so through owning real estate.” Yet like any investment, there is risk and uncertainty.
One can never know for sure what kind of return they will yield, so when thinking about moving on from your current home, you may ponder if you should hang on to it and rent it, or sell it for an immediate cash return. Not only is this a financial calculation, but it’s also an emotional one.
Below we’ll share a few considerations you should consider as you prepare to make your decision.
Factors to Consider When Deciding to Rent or Sell Your Home
- Your investment goals – One of the first things to consider is your future financial goals and your current financial position. If you have cash available for a down payment on a new home, then you need to weigh out the future return opportunities on your existing property. Before you make something of a gut decision as to whether to sell or rent your home, here’s the very basic line of thinking you should run through your head.
Can you go out and invest that money somewhere else and earn a higher return on invested capital than if you kept the property and rented it out?
At the end of the day, you want to put your money where it will offer you the best returns. Maybe it’s real estate, maybe it’s somewhere else, but you must determine what you’re going to do with that money before deciding to sell.
- Your willingness to be a landlord – The second thing you need to be honest with yourself about is your willingness to be a landlord. Whether you self-manage the property or hire a property management company, you will become a landlord in both scenarios. While a property manager serves as a buffer and takes a lot of the day-to-day out of being a landlord, if there’s a big issue, the final decision will always be yours.
- Your emotional attachment to the house – Lastly, you need to consider your emotional attachment to the house. You’ve likely made a lot of memories in your home and probably put a lot of blood, sweat and tears into it too, but when you make the choice to rent your home, the property becomes an asset. That means you need to think rationally, analytically, and coldly about the property as an asset and not one filled with family memories that need to be protected.
Deciding whether you sell or rent your home is not easy. There’s the emotional component and then there’s your willingness to take on the decision-making and asset-management responsibilities of being a landlord. If you find that you’re willing and able to do this, then the choice to rent your home becomes a financial calculus.
To hear more from us as we discuss important considerations when deciding to rent or sell your house, watch our webinar replay here and get in touch with us if you have any questions about owning rental property in Franklin County, Ohio.