When it comes time for homeowners to make a move, most automatically launch the process of selling. They clean up the house, make a few basic repairs, and call a real estate agent to list their home.
At that point, a for-sale sign gets posted in the yard and the process goes forward. But what if renting isn’t the best option for every situation? What if an alternative might make more financial sense?
Depending on your situation, there could be such an option. And as counterintuitive as it may sound, renting your house could be that better alternative to selling it. Here are four potential reasons why.
1. Generate Monthly Cash Flow
The biggest advantage of hanging onto your house is the monthly cash flow. If you’ve been in the place for several years and have paid down your mortgage balance, you might have a decent and affordable payment.
If you rent out the residence, you could be in a position to charge as much as 50 to 75 percent more. In other words, if your mortgage payment is $1,000, it’s possible that you could rent to someone for $1,500 to $1,750 a month.
That’s $500 to $750 in extra cash each month – on top of getting your mortgage covered by the tenant.
Most homeowners choose to use the extra cash flow in one of two ways. The first option is to take the surplus and use it to pay your own personal bills/fund your lifestyle.
The second is to apply it all to the mortgage and pay it off faster. You can do this until you own the house free and clear (at which point nearly 100 percent of your rent payment would go directly into your bank account).
2. Build Long-Term Equity
Even in a hot market like ours, real estate trends show that housing values are nearly always worth more in the future than they are today. By hanging onto your house and choosing to rent, you can keep that asset in your portfolio and wait until it should be worth more – in five, 10, or 15 years.
This equity (combined with the monthly cash flow) can dramatically improve your net worth and set you on the road to long-term success.
3. Enjoy Tax Benefits
Numerous tax benefits are associated with owning real estate. There are additional benefits when you own a rental property.
Not only may you write off mortgage interest and property taxes, but you can also write off all your expenses. Even property management services can be written off (and those allow you to manage the property cost-effectively without having to be the one who plunges toilets and picks locks).
4. Increase Future Flexibility
In addition to the financial benefits of renting overselling, more intangible perks like flexibility are within reach. When you rent instead of sell, you grant yourself future options and flexibility.
For example, let’s say you have teenagers right now. In 10 years, they might well be looking to buy a home of their own in order to start a family. If you already own an extra residence, you can either sell it to them, gift it to them, or let them rent it from you for a reasonable fee.
Another option is to move back into the house eventually when you’re ready to downsize. Rather than trying to find another property, you only have to move back into one you’re already familiar with. What fine choices you retain if you hold onto the house!
Adding it All Up
In today’s white-hot real estate market, selling is often the best choice. Property values are soaring and demand is continuing to drive prices even higher. There have even been situations in which buyers have agreed to purchase a house without ordering an inspection or asking for repairs.
In other words, it’s a great time to be a seller. But having said that, this market is not normal. At some point in the next 12 to 18 months, maybe sooner, we have to expect this bubble will pop.
If and when it comes to that, homeowners who need to move will have to make difficult decisions about whether they want to rent or sell. In some cases, selling may still be a viable option.
But the benefits of holding and renting might look a lot better then, too. Don’t neglect to study your options fully.
If selling seems quite resilient for you, why we’re here then! Check out our guide, it will help you out the most.