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Whether you’ve inherited a home or need to move away from the one you already own, you may be wondering whether you should sell your property or rent it out. It’s a big decision to make, which means you should take time to weigh the pros and cons before deciding. Before you jump into a sales or rental agreement, take the time to consider the following points.
Selling Pro: Free Up Capital
If you don’t need the property you currently own, selling it might be the right decision. If you sell to a professional buyer, you can have cash in your bank account in a matter of days, which means you can use it to purchase a new home or something else.
Selling Con: Time and Effort
The time and effort to sell a house can prevent you from going through that often-arduous process. Your property may sit on the market for weeks with realtors, and you also have to part with several thousand dollars to cover realtor fees and closing costs.
Fortunately, this con is offset by the fact that you don’t need to sell through a realtor. If you sell privately to a professional buyer, they can agree to purchase your property in hours and won’t charge you any fees as a realtor would.
Renting Pro: Ongoing Cash Flow
Anyone in need of an income top-up each week may benefit from renting out a home they no longer need. An annual cash yield of at least 7% may prove desirable. However, it’s essential to remember that a rental property income isn’t pure profit. You also have to factor in property taxes and other related costs.
Renting Con: Repairs, Vacancies, and Evictions
The idea of regular income each week as a landlord can be attractive, but it’s not guaranteed. You have to manage the financial implications of evictions and vacancies while also covering the cost of any repairs that may be required.
Selling Pro: Buy Another Property
Some people need to sell in a hurry to purchase a property in another area or even another state. Selling the one you currently have will give you the freedom to do that. You wouldn’t be stuck paying two mortgages, which would be the case if you decided to keep the property.
Selling Con: You May Have to Pay Capital Gains Tax
Depending on how and when you sell, you may need to pay capital gains tax. This tax type may apply if the property wasn’t your primary residence and you made a profit over the cap for an individual or married couple.
Renting Pro: Own An Asset
No one knows what the future holds, and your second property may grow in value as it sits with tenants in place. However, once again, you also need to factor in your property-related costs, which may impact what that growth looks like for your bank account.
Renting Con: Time and Effort
Being a landlord and homeowner takes time and effort, which you may not have to spare. You have to manage all the admin associated with rent and tenancy agreements and even perform property checks to ensure they look after it.
As challenging as it can be to decide whether you want to rent or sell, these pros and cons may give you insight into which option will be the best for you. For many people, the pros of selling far outweigh those of keeping.