If you own a home and are planning to move in the near future, you may be considering what to do with your current property. While the traditional path is to sell your current home and use the profits gained to put towards your new property, renting your current home is also a reasonable option.
By renting to a tenant, you may be in a position to benefit financially through monthly rent collection. The question that precedes that choice, however, is whether the responsibilities of the rental property (and tenants) are worth the monthly income you may receive.
If you are struggling with this decision, there are a few important considerations to explore in deciding next steps.
1 - Rental Properties Require Responsibility, Time, and Effort.
If you rent your home to a tenant, you take on the role of a landlord. This means that it will be your responsibility to screen potential tenants, repair damages, handle regular maintenance, and deal with any complaints or other issues that may arise.
Before you take on a tenant, consider your scope of resources. If you are not skilled in handling maintenance or repairs around the home, ask yourself if you have a reliable contractor, you can outsource those responsibilities to? Do you have the funds necessary to pay a contractor regularly or to handle general property maintenance and upkeep?
2 – Is the Current Market a Seller’s Market?
The state of the current housing market should influence your decision regarding your property. Low supply and high demand is your friend as a seller. This means that your home is more likely to receive attention quickly, and potentially sell at a higher price if you choose to list.
3 - Can the Ideal Rent be Charged in Relation to the Home’s Value?
This issue involves the Gross Rent Multiplier (GRM), which is the ratio of the home’s price to the rent it would generate. Simply put, the higher the price of the home, the flatter the rental curve becomes.
This means that while you could charge $1,000 a month for a $100,000 home, it is not likely that you could charge $4,000 a month for a $400,000 home. Due to this curve, the rental value eventually levels out, and you will not be able to receive the monthly payment that your home is actually worth.
In the long run, this is not a beneficial investment. Choosing to rent based on the GRM is directly related to the value of your home, and the monthly rent you would need to receive in order to make the transaction financially beneficial for you.
By renting to a tenant, you may be in a position to benefit financially through monthly rent collection. The question that precedes that choice, however, is whether the responsibilities of the rental property (and tenants) are worth the monthly income you may receive.
If you are struggling with this decision, there are a few important considerations to explore in deciding next steps.
1 - Rental Properties Require Responsibility, Time, and Effort.
If you rent your home to a tenant, you take on the role of a landlord. This means that it will be your responsibility to screen potential tenants, repair damages, handle regular maintenance, and deal with any complaints or other issues that may arise.
Before you take on a tenant, consider your scope of resources. If you are not skilled in handling maintenance or repairs around the home, ask yourself if you have a reliable contractor, you can outsource those responsibilities to? Do you have the funds necessary to pay a contractor regularly or to handle general property maintenance and upkeep?
2 – Is the Current Market a Seller’s Market?
The state of the current housing market should influence your decision regarding your property. Low supply and high demand is your friend as a seller. This means that your home is more likely to receive attention quickly, and potentially sell at a higher price if you choose to list.
3 - Can the Ideal Rent be Charged in Relation to the Home’s Value?
This issue involves the Gross Rent Multiplier (GRM), which is the ratio of the home’s price to the rent it would generate. Simply put, the higher the price of the home, the flatter the rental curve becomes.
This means that while you could charge $1,000 a month for a $100,000 home, it is not likely that you could charge $4,000 a month for a $400,000 home. Due to this curve, the rental value eventually levels out, and you will not be able to receive the monthly payment that your home is actually worth.
In the long run, this is not a beneficial investment. Choosing to rent based on the GRM is directly related to the value of your home, and the monthly rent you would need to receive in order to make the transaction financially beneficial for you.
Need Help Making that Final Decision?
The renting or selling dilemma should be handled on a case-by-case basis. Take the time to thoroughly analyze your specific situation and needs. You should consider the long-term benefits of selling versus renting your home. If you have the time and resources to maintain a rental property, and you can receive a monthly payment equivalent to or more than the value of the home, then renting may be right for you.
However, if the market in your area is a seller’s market and you do not want the added responsibility of acting as a landlord, selling may be an ideal decision.
However, if the market in your area is a seller’s market and you do not want the added responsibility of acting as a landlord, selling may be an ideal decision.
If you need more local insights or are ready to list your home, I can help. After spending two decades living and investing in this area, I have the network and knowledge to position your property for the best results. Call or email me today.
