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Thomas Winz/Getty Images April 15, 2022 Sarah Li Cain is an experienced content marketing writer specializing in FinTech, credit, loans, personal finance and banking. Her work has appeared in Fortune 500 companies, publications and startups such as Transferwise, Discover, Bankrate, Quicken Loans and KeyBank. Michele Petry is a senior editor for Bankrate, leading the site’s real estate content. Bankrate logo The Bankrate promise
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
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Should I sell or rent my house
The decision shouldn’t be taken lightly, and there are pros and cons to both scenarios. For example, selling may get you cash now, but renting will allow you to as home values go up and earn income through your tenants. Take a look at the following scenarios to determine which path is best for you.
When to sell your home
If you need the cash to pay for your next house
If your ability to buy a new home relies on accessing the equity tied up in your current home, then selling it is the best way of doing so. That way, you can take the proceeds from the home sale and put it toward your new . If you have no interest in being a landlord
can be time-consuming and challenging. Are you handy and able to make some repairs yourself? If not, do you have a network of affordable contractors you can reach out to in a pinch? Consider whether you want to take on the added responsibility of being a landlord, which means screening tenants and fielding issues, among other responsibilities, or paying for a third party to take care of things instead. If you are eligible for capital gains tax exemptions
If you sell your home for a profit, you may be able to exclude up to $250,000 of (or up to $500,000 for married couples) from your taxes. For this to apply, the home must have been your primary residence for at least two out of the last five years.
When to rent your home
If your move is temporary
If your move is short-term and you plan on returning to your current city in the future, you may want to rent out your home. Knowing there’s a place for you to live when you return can provide some security and peace of mind — and it may cost less than selling and purchasing another home at a later date. If you want the rental income
Extra income can be hard to turn down! But if you decide to rent your current home and want to buy another one with a mortgage, keep in mind that lenders will consider rental income when determining your financing. In some cases, a lender will only allow a portion of your rental income, typically up to 75 percent, to be counted as an . In addition, you will be carrying two mortgages at once, so make sure this is something you are financially able to take on. If you expect home values will go up in your area
It’s impossible to foresee with 100 percent accuracy where the housing market is headed. That being said, you may be able make an informed prediction. If you expect that within a few years or less, you might want to consider renting it out now and selling later, to take advantage of appreciation.
Renting vs selling Costs to consider
Both renting and . One of the most important things to think about is whether the rental income you’d receive will be enough to cover the mortgage and upkeep. To determine how much rental income you can reasonably expect to earn, take a look at what other similar properties are charging and weigh that against the costs of owning and maintaining the property — mortgage payments, maintenance, repairs, taxes, potentially hiring a property management company. From there, you can gauge whether you’ll be able to recoup your expenses and then some. Costs of renting out a home
Mortgage
Even though you’ll be earning rental income, you’re still responsible for paying the mortgage, which may not be entirely covered by the rent you receive. Home maintenance and repairs
You’ll need to keep up with routine maintenance to ensure the home is fit for tenants. As a rule of thumb, budget at least 1 percent of the home’s value every year (more if it’s an older property) to pay for maintenance. Property taxes
vary widely depending on location, but you can expect the rate to increase as your home’s assessed value rises. Finding a tenant
To find a tenant, you’ll have to get the word out. Consider any marketing costs you may incur, such as taking out an advertisement. You may also need to pay for background and credit checks of potential renters — though you might be able to pass this expense onto the tenant. The cost generally ranges from $15 to $40. Property management fees
If you need to hire a property manager, that will cost you, as well. These companies tend to charge a percentage of the rent price, typically 10 percent. Tax filing and accounting fees
Even if you do your own bookkeeping for expenses pertaining to the rental, you’ll likely incur costs for filing taxes using tax preparation software or if hiring an accountant. HOA fees
If your home belongs to a , you’ll also be responsible for , which can range anywhere from $200 to $2,500 or more a month. Landlord insurance
can cover certain costs, such as damage to the home or someone getting injured on the property. You can expect this to cost roughly 25 percent more than the typical homeowners insurance policy. Vacancies
Consider, too, the cost of vacancies between tenants. If a tenant moves out and you don’t have a replacement, that’s income you’re losing out on. Costs of selling a home
Home improvements
To get your home in shape to sell, you’ll likely have a few services to pay for. These might include and making any necessary repairs. You may also consider a to find out what needs fixing, which will add to your costs. Real estate commission
At up to 6 percent of your home’s sale price, could be your biggest expense when selling your home. Home staging
While not a requirement, can increase your home’s desirability to potential buyers and net you more as a result. Depending on the size of your home and other factors, staging can cost up to $2,500 or more. Utilities
You’ll still be responsible for paying your home’s utility bills until the closing date. Home loan payoff
Once you’ve sold the home, the proceeds will need to go towards the remainder of your mortgage. Closing fees
In some cases, you may be required to take on some of the , such as attorney fees. Bottom line
Deciding whether you should rent or sell your home depends on both monetary and lifestyle factors. To help guide your decision, consider what your financial situation is like, whether you’ll return to your current location anytime soon or if you’re interested in being a landlord. SHARE: Sarah Li Cain is an experienced content marketing writer specializing in FinTech, credit, loans, personal finance and banking. Her work has appeared in Fortune 500 companies, publications and startups such as Transferwise, Discover, Bankrate, Quicken Loans and KeyBank. Michele Petry is a senior editor for Bankrate, leading the site’s real estate content. Related Articles