Should You Sell Your House or Rent It Out?

When you’re getting ready to move, one of the biggest decisions you’ll face is what to do with your current house. More homeowners in Naperville and the Chicago suburbs are now considering the option of renting out their home instead of selling it.

According to recent data from Zillow, about two-thirds (66%) of sellers thought about renting their home before listing, with nearly a third (28%) taking the possibility seriously. This trend has grown compared to 2021, when fewer than half (47%) of homeowners considered renting before selling. So, should you sell your house to put the money toward your next home, or keep it as a rental to build long-term wealth?

Let’s walk through some important questions that can help you decide the best option for your financial and lifestyle goals.

Is Your House a Good Fit for Renting?

Before deciding whether to sell or rent out your home, think about whether it would make a good rental in the first place.

• Location: Is your neighborhood in high demand for rentals? Some areas in Naperville and nearby suburbs may have more demand, which can make it easier to find tenants and set a competitive rental price.
• Property Condition: Does your home need repairs before it’s tenant-ready? Renters expect a home that’s safe and well-maintained, and you may need to invest in repairs or updates before listing it as a rental. If your home requires costly repairs, selling might make more sense.
• Distance from Your New Home: If you’re moving far away, managing your rental can become a hassle. Handling maintenance, repairs, and tenant issues from a distance may require hiring a property manager, which adds extra costs.

If any of these factors seem challenging, selling might be the better choice. But if your property is in good shape, in a popular area, and you’re comfortable managing it, renting could be worth considering.

Are You Ready for the Realities of Being a Landlord?

Managing a rental property isn’t just about collecting monthly rent; it’s a commitment that requires time, patience, and flexibility. Here are some things to consider:

• Handling Maintenance and Repairs: Being a landlord means handling everything from broken pipes to heating issues. If you don’t have funds available for emergency repairs, being a landlord could become financially stressful. As Redfin notes:

"Landlords have to fix things like broken pipes, defunct HVAC systems, and structural damage, among other essential repairs. If you don't have a few thousand dollars on hand to take care of these repairs, you could end up in a bind."

• Responding to Tenant Issues: Tenants may contact you with questions, complaints, or requests at any time of the day. Being responsive and maintaining a positive relationship is key to keeping good tenants. If you’re not up for this responsibility, a property management company can help, but it will come at a cost.
• Dealing with Rent Collection: Tenants may occasionally miss a payment or need more time to pay. It’s important to know how you’d handle this situation without it disrupting your own finances.

Being a landlord can bring in extra income, but it’s important to be ready for the responsibilities that come with it.

Do You Understand the Costs of Renting?

Renting out your property can provide income, but it also comes with expenses that can reduce your profit. Here are some key costs to consider:

Mortgage and Property Taxes

You’ll still be responsible for paying the mortgage and property taxes, even if your rental income doesn’t fully cover them. Be sure to calculate whether the rent will at least cover these costs, or if you’re comfortable paying out of pocket if there’s a shortfall.

Insurance

A standard homeowner’s insurance policy won’t cover rental property. Instead, you’ll need landlord insurance, which typically costs about 25% more than regular home insurance. This is essential to cover damages, injuries, and liability on your property.

Maintenance and Repairs

Plan to budget at least 1% of the home’s value annually for maintenance and repairs. If your home is older, this cost may be higher. It’s also wise to set aside funds for major repairs, like replacing the roof or HVAC system.

Tenant Screening and Advertising

Finding a reliable tenant takes time and money. You may need to pay for advertising, background checks, and credit checks to ensure you’re bringing in a good tenant who will pay rent on time and take care of the property.

Vacancies

There may be times when your property sits empty between tenants. During these periods, you won’t receive rental income, but you’ll still need to cover the mortgage, taxes, and other expenses. Factor this possibility into your budget.

Property Management Fees

If you don’t want to manage the property yourself, a property manager can handle tenant communications, maintenance, and rent collection. Typically, property managers charge around 10% of the monthly rent. This service can be helpful if you live far away, but it reduces your profit.

Considering the expenses and potential income from renting is important. By comparing these numbers with what you could gain from selling your home, you’ll have a clearer picture of which option might work best for you.

Benefits of Selling Your House

If renting doesn’t seem like the right fit, selling could offer several advantages:

1. Immediate Access to Funds: Selling your home gives you immediate access to cash that you can use to buy your next property, pay down debt, or invest elsewhere.

2. No Ongoing Responsibilities: Once you sell, you’re free from the responsibilities of homeownership, which can be a relief if you’re not interested in being a landlord.

3. No Market Risk: If the housing market shifts, rental values or property values in Naperville or the Chicago suburbs could decline. Selling now means you’re locking in today’s market price.

4. Avoiding Property Wear and Tear: Tenants can cause wear and tear on your home, which could lower its value over time. Selling now means you won’t need to worry about potential damage.

Bottom Line

Deciding whether to sell your house or rent it out is a personal decision. While renting could provide steady income, it also comes with responsibilities and costs. Selling may give you immediate cash and peace of mind, without the risks of being a landlord.

If you’re still uncertain, reach out to a real estate professional who can help you evaluate both options. With their guidance, you’ll have the insights and support you need to make the right choice for your financial and lifestyle goals.

Let’s connect today to discuss your options and help you decide what’s best for you.

Call us today at (630) 276-7575 and we’ll make sure that your home-selling experience this 2024 is a smooth and rewarding one.

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