Is It Better to Rent Your Home or Sell It When You Relocate?
So after several months of searching, you’ve finally found your dream home. The negotiations are complete, the closing process looks like it will be smooth sailing, and your kids are already fighting over bedrooms. But what to do with the home you’re leaving? In many cases you’ll have to sell it just to afford the new place and the move. But if money isn’t quite that tight, you’ll have some additional options. Some people choose to hang on to their old house and rent it out to tenants instead. That certainly has it’s own positives, including steady rental income that could end up hugely beneficial as part of your long term investment portfolio. But it’s not always 100% positive either. In the end, only you will be able to answer the question, but generally speaking, is it better to rent your home or sell it when you relocate?
The first aspect to consider is the distance between your new and old homes. If you’re just moving a town or two away, renting the old place out could be a great move. You’ll be close enough to keep an eye on the new tenants, and it won’t be that much of an inconvenience if you have to head over and handle some sort of repair or oversee a work crew. But if you’re moving out of state or out of the country, things get a bit more complicated. You might not be able to interview tenants in person, instead relying on Craigslist ads and phone calls when handling the lease signing. In most cases you will be fine, but every once in a while you could run into a set of truly terrible tenants, and you won’t be there to see them destroy your property.
You’ll also want to consider the renting policies within your state. Some states are incredibly landlord friendly, and will give you every opportunity to remove a deadbeat tenant from your property and go to court to claim your lost rental income. But other states have laws on the books that almost completely favor the tenants. In these states, it can be quite difficult to deal with tenant issues. You could end up with squatters in your home, destroying the value and the physical property, with little to no legal recourse. Now this is definitely alarmist, and worst case scenario type of stuff. But a decision like this is significant, and you’ve got to look at these issues as well.
You should probably also consider future plans when making this determination. First of all, holding on to the home and renting it out will create all sorts of tax complications. This is another income stream to include in your tax filing, and if you like to do your taxes yourself that will cause all sorts of headaches. Check out RateSupermarket to see how these sorts of issues come into play. Even longer term, do you expect to remain in your new home for the foreseeable future? If you’re not 100% sold on the new property, renting your old place is a good way to hedge your bets. If you end up needing to sell the new home, you will always have the option of returning to the previous property. But if you’re nearing retirement, and want to travel extensively or permanently relocate to a warmer climate, you probably don’t want to deal with tenants and a rental property that will require maintenance.