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In this real estate market, if you would like to live in another house or simply have to relocate for whatever reason this question “should I rent my home or try to sell it?” inevitably comes up. Here are some of the things you should consider based on my experience as a landlord of several single-family rentals.

Being a landlord

Understand first what being a landlord means. You most likely will get calls about maintenance problems (especially while you are on vacation) and they are all going to cost you money. Here are some actual examples:

  • broken AC unit that cost $7K to replace
  • fire that consumed the backyard fence and melted all the siding on the house
  • torn up swimming pool liner (another $3.5K)
  • lost rent revenue for 2 months because you could not find new tenants with good credit score.

Bottom-line it takes some nerve to be a landlord. On the positive side you get to do some fun stuff like the landlord in the movie below:

You would say, what about hiring a property management company to handle it all? You can do that, but you are still going to be responsible for all major repairs and maintenance on top of paying the property management company. Cash flow from the rental may just not work out the way you want it to unless your rental is going to have a big positive cash flow.

Projecting rental income

Be realistic about how much rent you can charge. The fact that your mortgage (plus possibly a condo fee) is $X does not mean you can charge the same amount in rent. We have a great rental price comparables tool that allows you to type in your house type, number of bedrooms, ZIP code and see actual comparables in your area.

Rental home expenses

So, once you’ve done some research and determined what you think you can get per month, you need to figure out what it is going to cost you. Here are some typical costs:

  • You mortgage expense and condo fees
  • Property management company fees (about 10-15% of the rent).
  • Maintenance and major repairs  (about 10% of the rental income depending on your house condition and how clean and decent of a tenant you can find).
  • Vacancy rate (national average is about 9-10% - you can get a tenant that does not pay and it takes a couple of months to evict, or you just can’t find anyone for some time).

Tax benefitsof renting your house

On the positive side, your rental home associated expenses, including mortgage interest are taxes deductible, advertising, cost of repairs, all of that.

Bottom-line: So, should I sell or rent my house?

This is probably the real question you started with. Consider the current real estate market situation in your geographic area and determine the viability of selling your house. In this market, be realistic about the possible sales price.

Consider other factors. Here are a few probable scenarios:

  • If you are moving out of the area (can’t manage it yourself) and the rental is not projected to have a big positive cash flow – you will likely loose money every month. Decide what you would like to do: sell now, possibly with a big financial hit, or bleed slowly.
  • If you have a condo that was bought during the heyday or real estate, you most likely will loose money. Often rising condo fees make it nearly impossible to have positive cash flow, unless you bought it long time ago or already paid off the mortgage part. Markets can be different though.
  • Consider your own financial situation. You may be living paycheck to paycheck and have little in savings. Being landlord means being ready to quickly find and spend big chunks of money when major problems happen.

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