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Should I Sell My House and Rent?
Owning a home is, without a doubt, one of our biggest goals when we reach adulthood. We work extra hours to save for a down payment and ensure our credit looks good so we can get a mortgage loan. While this is the path for many of us, there are others who still prefer renting due to a number of reasons.
Whether or not you should sell your house and rent depends on your long-term goals. For instance, if you aim for stability and investment, it is better to keep your house. Meanwhile, if you want to relocate easily and skip the costs of repairs, you should consider renting.
Choosing between renting and owning a home can give you a headache if you do not know its pros and cons. Luckily, we have listed all of them in this guide so you can weigh and assess which option is for you.
Owning a Home vs. Renting a Home: An Overview
Buying or renting a home is a major life decision that can impact your personal finance, lifestyle, and even long-term goals. Both would require you to have a stable source of income because of the associated costs and payments. Plus, you would also need to pay for some maintenance, whichever option you choose.
Despite these similarities, buying and renting is still very much different. For starters, renting will give you more flexibility since you aren’t tied down to a property. On the other hand, owning a home is an investment that can be beneficial to you in the long run.
Note, however, that home ownership is not always better and renting isn’t always that easy. Thus, it is better if you understand all of their pros and cons.
Pros and Cons of Renting a Home
Most people decide to rent primarily because of their financial situation. But some other factors aside from money may influence us to rent, such as age, long-term goals, lifestyle, and the number of family members.
According to Pew Research Center, 36% of the 122.8 million households in the United States were occupied by renters in 2019. To help you understand what you are getting into should you decide to be part of this statistic, here are all the pros and cons of renting.
Pros of Renting
When you choose to rent, you would only be asked by the landlord or the property management company to pay for a security deposit. This is relatively cheaper than paying for the downpayment of a new home.
To compare, a security deposit is usually the amount of a month’s rent. Meanwhile, a house downpayment can be as much as 20% of the market value of the property. That’s a lot of money to pay upfront.
Less Strict Credit Requirements
Most landlords also run a credit check before they allow you to rent their property. Even if your credit score is fair or poor, you still have a chance at renting.
Landlords, especially the independent ones, accept renters with low credit scores even though the rental market is tight. If you’re lucky, they won’t even check your scores at all. This is as long as you are able to pay the required security deposit.
Lower Rent Amount
Even though the national median rent in the United States reached $1,827 a month in April 2022, it is still less expensive than a monthly mortgage payment to a creditor.
Unless you are renting a huge house or apartment, expect that the amount of money you need when renting won’t put you in much financial risk.
No Property Taxes
Real estate taxes can amount to thousands of dollars depending on the property’s location and value. This is a huge financial burden, especially if the owner still pays home mortgage loans.
For renters, this isn’t a problem since the landlord, or property manager takes care of all the taxes related to the property. If you currently own a home and are burdened by the taxes, a home sale into renting may make the most sense.
Cheaper Utility Costs
Most rental properties are compact; thus, they are more affordable to power than most houses. Expect that your electricity bills won’t be as expensive as when you own a two-story house. This is also the case for other utilities like water, internet, sewer, etc.
No Repair Bills or Maintenance Costs
When you rent, all the expenses for maintenance, necessary repairs, and improvements are shouldered by your landlord. If the faucet is leaking or the roof gets damaged, all you have to do is call your landlord and they’ll have it fixed.
If you’re a homeowner, on the other hand, you will pay for all the repairs on your own. This can be stressful, especially if you are in a tough financial situation and you want to put your house for sale on the local market.
Access to Luxurious Amenities
If you’re renting in an upscale apartment, chances are, you have access to a fitness center, pool, or other amenities that you would otherwise build or pay to access if you were a homeowner. Landlords build the cost for these amenities into your monthly rent, so there is no additional charge.
Not Affected by the Rocky Real Estate Market
The real estate market can be quite rocky at times and this can directly impact the value of a property, the taxes connected to it, and the home mortgage amount the owner has to pay.
This doesn’t affect renters as much as it would a homeowner. In fact, renters may not be affected at all when the housing market cools off.
If you know that property values in your area are stagnating or it's a seller's market, it may more sense to sell your home and rent.
Ease of Relocating and Flexibility in Choosing Where to Live
While a homeowner’s option on where to live is restricted, a renter can live anywhere. There’s also the fact that homeowners need to make a home sale before they can relocate to another place. This can take months to years unless they sell to a cash home buyer.
Meanwhile, renters are only tied into a lease for a year. They can even get out of it in most cases by giving an advance notice.
Both renters and homeowners pay for insurance, but the former would only need to pay a small amount of money. What’s more, it already covers almost everything, including furniture and other valuables.
According to the Insurance Information Institute, the average cost of a homeowner’s insurance is $1,259 annually, while a renter’s insurance policy is only $179 per year. Looking at the big disparity between the costs, renting will save you substantial money on insurance.
No Long-Term Commitment
The beauty of renting is that you only need to sign a lease for 12 months. That means you aren’t tied to a property, and you can choose whether to renew the lease or move out after the contract has expired.
Cons of Renting
No Right to Ownership
Renting means you don’t have any right to the property. You cannot make changes or improvements to the house just because you saw something cute on Pinterest. You cannot arrange for someone to live with you unless the landlord or property manager approves. And most importantly, you cannot earn equity in the property.
One of the biggest disadvantages of renting is the fact that it doesn’t offer permanence or stability. Even if you rent a house for decades, it is still not yours at the end of the day. Each time your rental contract expires, you could be asked to move out.
Bad Neighbors and Landlord
If you are unfortunate, you may have to deal with a bad landlord— someone who doesn't take care of maintenance issues or who is very slow in communicating. When owning a house, you are your own landlord!
It is also possible for you to deal with annoying neighbors. Most rentals are side by side, so it is hard to avoid hearing others’ noises. But, when you own a home, you usually have more privacy from your neighbors.
No Buildup on Equity
Homeowners build equity while making mortgage payments for their homes. If you are renting, you won’t have any equity at all. Your monthly rent is only helping pay someone else’s mortgage so they can grow the equity of their property.
No Tax Incentives
You cannot use your rental payments for a tax deduction the same way mortgage payments work.
This means that you still have to pay your taxes in full and your monthly payments only go to your landlord (probably helping them settle their own mortgage payment so they can get tax deductions).
Bound by the Terms of Contract
When you rent, you will sign a lease of ~12 months and pay a security deposit. Depending on what is in the contract, you may not be allowed to make any house improvements, be charged for late payment, be forbidden to move to another rental without a month’s notice, etc. This means that you have less control of your housing situation.
Pets May Not Be Allowed
Many rentals do not allow pets to prevent the property from being damaged or the neighbors from being disturbed. Rentals that allow pets often charge fees and most large pets are still not allowed. If you own a Saint Bernard or a Great Pyrenees, renting an apartment may be out of the question.
No Fixed Rent Amount
Although your monthly rent is cheaper than paying for a mortgage, it is not set in stone.
In other words, the landlord may ask for a higher price during lease renewal if they want to increase their rental income, match the market rate of the property, accommodate the increase in tax payments, or pay for improvements.
When selling your home and debating whether to rent, remember to factor in a rent increase each year.
Always at the Mercy of the Landlord
The downside of not being required to make repairs to the rental property is that you have to wait for the landlord to make repairs. Some landlords won’t hurry to fix these things or if they do, they’ll do it cheaply so their rental income won’t be affected.
Pros and Cons of Owning a Home
According to the United States Census Bureau, the homeownership rate in the country for the first quarter of 2022 reached 65.4%. This proves that owning a home is still part of the American Dream— which is understandable given how much peace of mind owning a home brings.
It is important to note, however, that compared to renting, owning a home would make a bigger impact on your finances and lifestyle. To assess if you are better off as a homeowner than a renter, take a look at these pros and cons.
Pros of Owning a Home
Equity, also tagged as “forced savings,” is the difference between the market price of your home and the mortgage you owe. As your home appreciates over time and you pay down your mortgage, you build equity. However, equity in your home is hard to access unless you take out a HELOC or sell your home.
Your home’s value increases over time. That means if you consider a house your primary residence for long enough, you’ll earn a higher profit when your real estate agent lists it on the housing market (especially in a seller's market).
Selling when the market is hot will allow you to extract more equity, but if you sell and then buy another home, you risk losing those gains. Whereas if you sell and then rent, you may be able to buy back in when the housing market cools down.
Increase in Credit Scores
While your credit score can experience a dip once you take a house loan, it will increase in the near future as you pay your mortgage regularly.
Building credit is important when you need to loan money, but rent payments don't work the same way. Simply paying your rent each month will not build credit like paying a mortgage.
Full Control Over the Property
Unlike renting, you have full control over your primary residence if you are a homeowner. You can make renovations and improvements however you like. You can also allow pets inside your own home, no matter their size.
In some cases, there are a few rules to follow when your home has a homeowners association (HOA).
When you live in a rental property, you don’t have much privacy. You live right next to your neighbor, so pretty much everything you do, they can see or hear.
A home sale might make more sense if you want a private space. No landlords can come in and you won’t have to hear your neighbor practicing the drums Saturday morning.
Fixed Rate Mortgage Payments
While rents can increase after a lease ends, your mortgage payments and fixed interest rates are stable. In other words, you’ll be paying the same amount monthly. Even if there’s a fluctuation in property taxes or insurance, it is still not as often as rent increases.
If you want stability for your future, a home purchase is highly suggested. One of the greatest allures of homeowning is the fact that you have a roof above your head until selling your home. You’ll also have a strong community and social ties since you're settled in one place.
Downsizing is Possible
Should you decide to downsize to a more affordable living space, you can do so without any issues. This ability to cash out equity and downsize is advantageous to many retirees who want to move closer to family.
In comparison, if you are a renter, you can’t easily downsize, as an apartment is about as downsized as you can go. Of course you can easily relocate, but there is no equity to extract in the move.
One of the core benefits of homeowning is its tax benefits. You can deduct most of your current home expenses from the taxes you need to pay to the government. This includes your mortgage interest, local, state, and property taxes, and the interest rates of home equity loans.
If you choose to sell your home and rent, pay attention to capital gains. Capital gains tax is required if the profit from your home sale is $250,000 for singles and $500,000 for married couples.
Cons of Owning a Home
High Upfront and Ongoing Home Costs
When deciding to sell and then buy another property, expect that you will have to prepare a large downpayment because home prices have increased in recent years.
When selling, prepare to cover the expenses for real estate commission and closing fees, including the appraisal fee, home inspection, mortgage insurance, title search, survey fee, title insurance, property taxes, and more. Closing costs may amount to 2% to 5% of the sale price.
When buying, you have your monthly mortgage payment plus taxes, utilities, maintenance, insurance, etc. If you want to simplify your living expenses, renting may be in your best interest.
Property Value in the Housing Market Can Depreciate
Unfortunately, not all properties increase in value over time. It is possible that your home will lose value over time (especially if you bought in at the peak of the housing market).
If you can’t maintain your current home, its value will also depreciate. This is the case for most hoarder homes, condemned houses, and fixer uppers.
Selling real estate at a loss is not ideal, but if you don't want the hassles of maintaining real estate anymore, you can sell your home then rent to leave repairs to your landlord.
Repair and Maintenance Costs
Aside from the expensive upfront costs and monthly mortgage rates of your dream home, you also need to worry about the costs of repairs and upkeep if you are a homeowner.
While you can DIY some home repairs for a lower cost, there are issues that can only be addressed by a professional. If choosing to keep your home, you can't just account for mortgage rates. We recommend setting aside money every month to cover repairs as they arise.
Unlike renting, it is hard to move places when you own a property. This may come as a problem if you want to accept a job offer in another city.
Yes, you can sell your current home and move, but the process of selling may take months with real estate agents depending on the real estate market in your area. You also won’t profit much from selling if you haven’t owned the property long enough to build up equity.
Taxes and Fees
Some of the regular fees you have to pay as a homeowner include property taxes, HOA fees, homeowners insurance, private mortgage insurance, utilities, and maintenance.
Individually, the amount seems manageable, but if you look at it collectively, it can be pretty overwhelming, especially if you’re still paying for a monthly mortgage. If all these fees seem daunting to you, selling your home and renting makes sense.
Final Thoughts: Should I Sell my House and Rent?
We cannot say for sure whether renting or owning a home is best for you since we each have different goals and financial capabilities. But we hope that through the comprehensive list of advantages and disadvantages of renting versus owning real estate, you already know which path to take.
If you decide to sell your property and rent, contact us at Sell My House Fast. We’ll buy your house for cash (and we’ll do it fast!), so you can leave the headaches of home ownership behind.
Fill out our form below or contact us at (844) 207-0788 if you want to learn more about selling your house.