If you’re thinking about selling your old home to upgrade, relocate, or downsize, then this article has some information for you. There are many pros and cons to both selling your home or renting it out. Many have been able to rent out successfully while many others decide to outright sell and move on. The latter is what we’re going to consider and review in this blog post. In my local market of Winchester, Virginia in the Shenandoah Valley, there’re a lot of folks moving here to retire and many others are making the decision to move away.
First, let’s review a few situations where selling a home may make a lot of sense:
Upside down mortgage This situation of owing more on a mortgage than what the home is worth in the market is known as being “upside down” on a mortgage. It often makes sense for those who are struggling with keeping up on a mortgage payment. It’s smarter to sell and move on to a less expensive rental most of the time. A short sale may be a viable option in which the money from selling the home fall short of the balance owed on the total mortgage, but the mortgage lender is alright with accepting the smaller amount rather than moving forward with a foreclosure. Short sales typically don’t release the borrower from having to pay back the difference unless it’s agreed to and it will impact a person’s credit record. This could increase the barrier to entry for renting a new property. This should be kept in mind.
Loss of income Sudden unemployment or other loss of income can be absolutely brutal in a two-income household let alone a single-income home. For many folks, it’s not possible to set aside an emergency fund for situations like this. If a person finds themselves suddenly out of money coming in, selling a home could be an extremely wise financial decision. This is especially true for those with strong equity in the home. Relieving some of the burden with a rental cheaper than a mortgage itself can be beneficial in this situation as well.
DEBT If a person is drowning in debt, releasing financial obligations of a mortgage may be an excellent situation. It’s important, however, to take careful consideration and time to review all possible options before this method. Owning a home is a strong bond, and if it’s possible to supplement income, then downsizing a vehicle or selling some personal possessions may be better options. I’ve heard it recommended to evaluate mortgage payment as a percentage of monthly income. If it’s more than 50%, it may be time to call your favorite realtor.
Next, let’s review a few quick benefits of selling your home.
1. Escape a drop in the market
If you have a concern about the real estate market going down, you’re certainly not alone! Many wonder and worry the coming years may bring a serious downturn in the housing market. Selling your home now allows you to lock in current prices, which in my experience results in a profit 9/10 times. Realizing gains is important if you’re depending on a certain value in regards to your future plans for retirement or otherwise.
While it’s impossible to predict the future, if you feel like the market is going to drop eventually and you’d rather pull out the value you have currently, then selling makes complete sense. By pulling equity from your home, it also opens the possibility of investing that money and hopefully making more money. The other option of renting could possibly tie up this money that could be bringing in some bacon as a different, lucrative investment.
2. Freedom after the sale
It’s no secret that there’s a lot of responsibility and duties that come with being a landlord, even if there’s a property manager involved. There is a lot of value in the freedom gained from unloading a home. While selling is stressful and there will be a good deal of work involved, it’s all over once the check is received, home is sold, and you can walk away from the situation entirely. No more having to receive emails or phone calls in the middle of the night bearing bad news about your tenant or some expensive repair needing to be made. It’s important not to overlook the emotional burdens of being a landlord, especially from a distance away. I can attest to the difficulties of owning a rental property in a different state.
3. Getting a downpayment for the next home
Maybe you’re looking to purchase a multifamily investment property next. Or maybe you’re ready to upgrade. Either way, one of the main reasons people choose to outright sell rather than rent out is because it provides a large cash payment that is often enough to cover the downpayment of the next house and often some more. Having a large downpayment puts you in a much better position to purchase a home in a more desirable location and at a better price.
4. No dealing with tenants
If you’ve never heard of someone dealing with a nightmareish tenant, believe me when I say you are lucky. Having my personal property destroyed by tenants has happened far too many times. It’s been on the brink of too much to handle for me before. If you’re the type of person who constantly worries about your property in the hands of strangers, I can relate. Then comes the repairs and maintenance costs. Landlording is not easy or stress-free by any means. An outright sale grants freedom from the stress and burden of tenants! For my rentals in Winchester, VA dealing with tenants can be one of the most difficult aspects of my work in real estate. With that being said, I’ve also had wonderful and respectful tenants who I’m happy to have in my life.
Final Thoughts
It’s always a case-by-case decision, but there is such a thing as a wrong choice. Many times, there will be a decision to rent that later brings about a whole lot of regret. It isn’t unordinary for the renting experience to be a difficult one. When this happens and you decide you’re ready to cut ties and sell, it helps to have an expert who can help you navigate and be a go-between to ease the burden. I’ve sold homes with tenants before, and it’s important to communicate well in order to time showings and ease the stress and headache for both sides.
Choosing between selling your home and renting it out is not a task that should be taken lightly. It’s a major life decision without a doubt. Rash choices can come back to haunt you, so don’t do it by yourself! I’d be happy to offer a free consultation and offer some guidance if you are currently considering selling or renting out your first or second home. If you reside in the Shenandoah Valley area, Frederick County, Warrenton, Stephens City, Ashburn, Winchester, Front Royal, or surrounding areas, I’d love to come meet you face to face and personally assess your options for converting into a rental or outright selling. Give me a call.
