Buying a new home can be an exciting and promising season. But, if you are a home-buyer moving from your starter home, there are a few extra things to consider. Will you choose to sell your first home or rent it out?
Consider Time
Are you in a hurry to relocate due to a career change? If so, selling your home may be the wisest option. Selling the house may require an upfront amount of personal time, but you will be free and clear following the sale. Deciding to lease the home to prospective renters means making the commitment to being a landlord for years to come.
Consider Permanence
Are you relocating to another home for a temporary job placement or are you going for good? If you intend to eventually return to your home, you may want to simply lease it and give yourself an opportunity to return at a later date. If you feel the move is permanent, the responsibilities of being a landlord may be too much of a burden.
Consider Preparedness
Relocating from your first home can be an emotionally tumultuous time for many. When the home is the place you, or your children, were raised, the memories are often intertwined with the geographic location. If you feel that parting with the house would cause regret, it can be a wiser decision to rent it out for awhile as you adjust to your new house.
Consider your Family
Some parents choose to gift or sell their older home to grown children as a wedding present. Consider this option if you have children close by in need of a place. This can be an easy way to stay attached to your former residence while helping the next generation. Adult children may also be good tenants as they have a common interest in keeping up the residence for the benefit of their parents.
Consider your Break Even Point
Will renting out your home allow you to break even every month? To consider this, allow 25-30 percent of the rent be reserved for maintenance and repairs; leaving only 70-75 percent of the rent to cover the mortgage, taxes, insurance and utilities. You also must weigh the cost of your own personal time against the amount of income you will receive.
Consider the Desirability
Proximity to universities and other hotbeds of activity can affect the desirability and cost of the rental. Having the ability to rent to college students can allow you to charge more than a landlord who is distant from campuses or businesses. Many renters are interested in the “walk score” of a property; meaning the distance on foot to shopping, restaurants and other recreation.
Final Considerations
While making the leap to your new home is a wonderful experience, having closure with your starter home can be important. Remembering to separate emotion from the sale can be financially beneficial, but if you feel that you would regret ignoring that angle, consider your memories and nostalgia. Weigh the benefits of cost and convenience before selling or leasing and always keep in mind your personal time constraints.
There may be freedom in making a finalized sale, but committing to lease out your home can be a source of income for many years.
