Have You Considered Renting Out Your House?
Whether they’re thinking about upgrading or downsizing, most of the people who are thinking about getting a new home are planning to sell their current home. Usually, they know that the equity in that home will turn into a nice down payment on their next property, allowing them to reduce monthly payments or make the new home more affordable.
However, there’s another choice: renting out the old home. Instead of getting all of the equity in one lump sum, renting gives you a regular income until you decide to sell. That might be a more attractive idea in the long run.
Think carefully about all the advantages and disadvantages to determine whether or not you should rent out your current home.
The Real Estate Market
One of the biggest factors that might play into your decision is the current real estate market. Are you going to be able to sell your home for the price you want? Will you sell it quickly or will it sit for a year? If you can’t sell it quickly for a good price, then renting may be the right option for you. On the other hand, if it’s a sellers’ market, and you think that you’ll get the highest price possible, you should probably sell.
The “Rentability” of Your Home
Some homes are easier to rent than others. Got a big home close to the university? You’ll probably be able to easily rent to a group of students looking for a roommate situation. How about a two-or-three-bedroom home with a backyard in a good school district? Young families will be fighting over who gets to rent the place.
However, some characteristics can make it harder to rent your home. For instance, if your home has a lot of upgraded features, but it’s in a more modest neighbourhood, you may have a hard time finding people willing to pay the rental price you need.
Preparing Your Home to Rent
What will you need to do to get your home in the right condition to rent or sell? When you’re planning to sell the home, making those repairs isn’t so hard because you know that you’ll be able to recoup those costs in a few months when you sell it. If you’re going to rent it, though, you’re unlikely to see immediate returns on the money you spend. If you don’t already have the cash you need to get the home in rentable condition, it’s hard to find the money to make this happen.
Being a Landlord
Selling your home is fairly easy. Once you transfer ownership, you don’t have to think about it anymore. As a landlord, though, you’ll be responsible for a lot of extra things. You’ll need to find tenants and make sure they pay their rent on time each month. You’ll need to make immediate repairs if something breaks. Some people feel like this isn’t worth the hassle, but others don’t mind it at all.
Of course, you can also hire a property management company to handle some of these details, but that’s going to eat into your profits. Think carefully about what all of these choices could mean for you.
If you’ve decided that renting is the right move for you, you should spend some time thinking about your business model. Renting to people who live in Edmonton can give you a steady income. Depending on the size, style, and location of the home, you could get $1,500-2,000 a month, and maybe even more. However, if you were interested in renting to travellers – like on Air BnB – you might get bigger profits overall, assuming your home doesn’t sit vacant too often.
In either case, though, you’re responsible for getting renters. Long-term renters are usually less of a hassle.
It’s All About the Money
Ultimately, you have to crunch some numbers to figure out what’s the best option for you. If you sell your home, can you do it quickly, and how much will you get? Will you be stuck paying two mortgages for a long time while you wait for your home to sell? Will you get enough in equity to make a big difference in your next home’s mortgage payments? Could you gain bigger profits by waiting to sell the home a few years from now?
If renting seems like the more attractive option, will you be able to charge enough rent to cover the expenses? How will this additional income affect your tax situation? Can you do a lot of the management yourself or will you need some professional help?
Clearly, there are both advantages and disadvantages to renting out your home instead of selling it. The key is to decide what makes sense for your personal situation.