Every property owner faces the dilemma of whether to sell their home or rent it out. It can mainly be if they want to relocate to some other place, are stuck in a financial predicament, or have different goals for their home. During this time, they may want to sell their home, be free from responsibilities, and receive some financial returns.
Some owners may also rent their homes to tenants to secure passive income. They may entrust their property to a trusted company like TCT Property Management Services. Either way, it is essential to consider multiple factors, along with the pros and the cons, before deciding.
In this blog, you will get comprehensive insights into both sides. You can use this to make an informed decision about whether you should sell your home or rent it out.
When Should You Sell Your Home?
As the owner, you can consider selling your home in Mesa, Gilbert, Chandler, Scottsdale, Phoenix or any other East Valley area. Since it is a major decision, you must carefully weigh the upsides and downsides of selling your home. Here are a few situations when you can seriously consider selling:
- You Want Immediate Cash
The primary benefit of selling your home is the immediate cash it provides. If you are struggling with debt or need money for other investments, selling your property can provide a lump sum of cash that you can use to achieve your financial goals. You can also use the money you make from selling your home to buy a better home with more amenities, a better location or more space.
- Arizona Has a Seller's Market
According to The Arizona Association of Realtors, home values in the area have increased by an average of over 30% in a year. Combined with the increasing listing prices and limited inventory, the market here is a seller's market. The demand for property is currently outweighing its supply. It also means that buyers are putting in offers hurriedly.
Since this trend may likely continue for the next several years, you can consider selling your house. You will receive multiple offers for your home, and you can raise prices accordingly. Ensure that you evaluate your home and set a price that will be profitable for you.
- You Do Not Want to Become a Landlord
As a property owner, you may also have to become a landlord if you place tenants in your property. Some individuals are opposed to the idea of becoming a landlord. The role requires you to handle tenant issues, management responsibilities and maintenance duties. If you are not interested in such a time-consuming role, you can sell your home.
Selling it relieves you of the management responsibilities of renting out a home. You will no longer have to worry about finding tenants, collecting rent payments, or addressing maintenance issues.
- Your Home May Not Secure Reasonable Rent
Tenants want properties that are in good condition and give them a homely feeling. They also pay more if your home has amenities and is in the best condition. However, if your home is not in good condition, has significant damage, or does not offer anything to attract tenants in the current market, there is no use in renting it out.
As it does not offer any value addition to the tenant, you can consider selling it to someone who flips properties. If the home values decline in the future, you can also avoid potential losses. In such situations, selling can be the right choice for you.
Disadvantages of Selling your Home
There are upsides and downsides to everything. You know how selling your property may benefit you in the long run. Here are a few disadvantages of selling your home:
- Missed Appreciation
Home prices in Arizona may increase steadily throughout 2023. If you sell your property, you may miss out on potential appreciation in value. If you hold onto your home for several years, its value may increase significantly, and selling it too soon could mean missing out on this appreciation.
- Transaction Costs
Selling your home can also come with significant expenses. It is not as simple as putting the house up for sale and signing it over to the buyer. The process can become a hassle if you do not consider the additional costs it can incur. It includes real estate agent commissions, closing costs, and capital gains taxes. These costs can eat into your profits and reduce the amount of cash you receive from the sale.
Selling your home can reduce your hassle by reducing your management responsibilities. However, if you do not plan the sale properly, you can lose money. You can also consider taking assistance from experts with experience buying and selling properties.
When Should You Rent Out Your Home?
Renting out your home is also a monumental decision that requires significant consideration. You may need to take primary responsibility as the landlord. You may have to manage the property, look after its maintenance, conduct repairs, and resolve tenant issues. If you are deciding regarding your home, here are a few reasons why you should do so:
- You Want Passive Income
Perhaps the most significant benefit of renting out your home is the passive income it provides. If you own a home in high demand, you can earn a steady income from rent payments. You can use this income to pay off the house’s mortgage or invest in other properties or assets. Renting out your home can be a lucrative decision.
- The Demand for Rentals is High
Currently, areas in Arizona like Phoenix, Mesa, Chandler, and Scottsdale have a high rental demand. The rents are also higher here than average, with Arizona attracting almost 109,000 new residents in 2021. If there is high demand for rentals in the area near your home, renting it out can be the best option.
- You Have Always Wanted to Become a Landlord
You can also consider renting out your home if you have always wanted to become a landlord. As the landlord, you can be responsible for managing the property and ensuring that it is well-maintained. It includes finding tenants, collecting rent payments, and addressing maintenance issues.
If you have an existing inclination to handle these responsibilities, you can consider renting out your home. Additionally, you can hire a property manager and leverage their experience to get the most out of your rental.
- To Experience Tax Benefits
When you rent out your home, you can deduct certain expenses from your taxes, including mortgage interest, property taxes, and maintenance expenses. These deductions can reduce your tax bill and increase your profits.
- To Avail Property Appreciation
In addition to the passive income from rent payments, renting out your house can also provide long-term appreciation in value. Over time, home values tend to rise, especially in an area like East Valley. If you hold onto your home, you can benefit from this appreciation.
By conducting research and making an informed decision to rent out your home, you can reap significant returns in the long run. If this process is challenging, you can hire a property management company.
Disadvantages of Renting Out Your Home
Apart from these few upsides, renting out your home has a few disadvantages. You can read them here:
- Potential Vacancies
Another downside of renting out your house is the potential for vacancies. If you cannot find tenants or if your tenants move out unexpectedly, you may be stuck paying the mortgage on an empty home. It can be incredibly challenging to rely on rental income to cover your living expenses.
- Legal Issues
Renting out your home also comes with legal responsibilities. You must comply with local housing laws, ensure the property is safe and habitable, and handle any disputes with tenants. If you are unfamiliar with these legal requirements, you may want to consult a lawyer or a manager.
Regardless of which direction you decide to go, both processes require you to implement your knowledge and expertise. If you are someone who does not have the time or skill to make this decision, you can benefit from hiring a property management company in Mesa, Arizona.
Which Other Factors Should You Consider While Making a Decision?
Apart from these pros and cons of selling or renting out your home, other factors require thorough consideration. Here are a few of those:
- Financial Goals
As the owner, you must consider your financial goals when deciding whether to sell or rent a home. If you aim to maximize their return on investment in the short term, selling the house may be the best option. However, renting out the home may be the better option if the goal is to build long-term wealth and generate passive income.
- Property Condition
The condition of your home matters in both scenarios. If your home requires significant repairs or renovations, renting it out may be more challenging. On the other hand, renting it out may be a lucrative option if your property is in excellent condition and in a desirable location. You can consider your house's current state and make an informed decision.
- Tax Considerations
Both options have tax implications that you must be aware of and factor into your decision-making process. You may also need to consider tax professionals to handle this for you. When selling a house, you may be subject to capital gains taxes.
When renting your home, you can deduct certain expenses on their tax returns, including mortgage interest, property taxes, and depreciation. These deductions can help reduce the amount of taxable income that you have, which can result in lower tax bills.
- Time and Effort
Selling your home typically involves a shorter timeline and less ongoing effort, as you can sell it and focus on other endeavors. On the other hand, renting out a home can require more continuing effort and attention, as you need to find and manage tenants, collect rent, and handle any maintenance issues.
The Verdict
Considering all these factors, you can choose whether to sell your home or rent it out. Your decision depends on your perspective and the effect of these factors on your home.
You can also take the help of a qualified property management company like TCT Property Management Services. We provide expert management services to owners and can maintain your home without any hassle. We manage homes in the East and West Valley, including Phoenix, Gilbert, Chandler, Scottsdale, and Mesa.
