Selling vs Renting Out Your Property: Which Makes You More Money?
What do you do with a property you own that you’re no longer using? Sell it? Or rent it? Here’s a quick and simple rundown on how to decide.
Let’s say your house is already paid for and you’re thinking of moving to a new one. What do you do with the property you’re no longer staying in? You can turn it into a good investment if you play it right.
One thing above all determines how much you’ll earn from this property of yours: whether you choose to rent it out or sell it outright.
Being a landlord and renting your property out can be a lucrative venture. For one, you always gain income for as long as you’re renting out the property. Furthermore, you can increase rent prices if the value of your property rises, getting you even more income over time.
But with renting, you also need to do the work of looking for tenants, maintaining the place, and keeping everything comfortable. This extra work might not be appealing to some. Also, you wil have to keep some extra funds handy for times when tenants don’t pay, cause damage, and to make payments in between tenancies. There’s also the chance that you won’t be making enough on rent to pay for the properties’ monthly expenses. And if you make a profit out of renting, that profit is taxable.
With selling you get the money with no need to stay with the property and manage it. Your responsibilities as a home owner vanishes once the handover is complete. Selling also gets you more money sooner (from the downpayment) compared to the monthly funds over a longer period of time with renting. That large sum can then be used as capital to invest in other properties should you so choose.
However, selling your property may not be as lucrative as renting in the long run. There’s a chance you’ll be missing out on increasing rental prices should the value of that property rise in the future. You’ll also lose out on having a second property to move into if your family gets big enough such that you may want to move some family members around.
As most of you probably figured out already, it really depends on whether or not you have the patience to stick it out with renting, or you just want some funds right away. Selling is clearly the easiest choice among the two, but if you’re willing to put in the extra effort and you love meeting new people, renting may be the more rewarding option.
To decide whether renting can earn you more than selling, there’s actually a handy web calculator on Forbes.com that you can use. You just input the figures requested and the app tells you if renting is more worthwhile for your property by displaying the capitalization rate (the more, the better).
Now that you’re equipped with this information, we hope you can get out there and make a more informed decision on whether to sell or rent out your property.
Do you have your own ideas on how to choose between renting and selling? Do let us know in the comments section below!