Relocating for work, wanting a change, or discovering your ideal home may leave you faced with an agonizing decision: Should I sell or rent out? Renting out could bring in additional income from renters while selling can use equity for purchasing your next one. We talked with two investors who have seen both sides to provide insight on the pros and cons of selling or renting out your house.
A tale of two owners
How you decide whether or not to sell or rent out your house depends on various considerations, including potential rental income compared to expenses, the amount of work you want to put into it, potential profit if sold, and other goals you may have for it.
Decisions between selling or renting can be hard for anyone. Experts or not! Here are two stories where renting didn’t pan out as anticipated.
Renting regrets: Bad renters turn investment sour
Greg Kurzner, one of Atlanta’s premier real estate investors, recently bought and renovated an investment property in Stone Mountain, Georgia, prompting several agents to ask whether he intended to sell. Instead, he made the wise decision of renting it out instead.
He had difficulty recruiting tenants with strong credit and rental histories, so after leaving his house vacant for some months, he relaxed his criteria to secure one tenant. Things seemed fine at first but after three months late rent payments and excuses ensued as well as lengthy eviction proceedings against this tenant.
Kurzner found it distressing to discover that all his hard work had been undone – all those brand new fixtures had been destroyed, along with any hard earned investments made over years of renovation work he had completed in it.
Kurzner was blindsided by hope over common sense when making a costly decision to rent his property to unqualified tenants rather than have it sit vacant with no rent coming in, rather than have vacant houses sitting unrented until eventually selling his home with further repairs costing $12,000 done after tenant damage had taken its toll on it. Eventually, he sold it, after spending another $12,000 fixing damage caused by tenant mistreatment of it.
Seller’s remorse: A missed $185k opportunity
TJ Sayers of Birmingham, Alabama owns an investment company that typically purchases 50-60 properties annually and turns many of them into rentals – though one particular property sold still gives him grief to this day.
The time was when Sayers bought his home for $115,000. He resided there until 2017. Then he sold it in 2017, he got $185,000. He still had to pay around 80,000 mortgage loans, but after closing costs and commissions the seller made around 85,000 in profit from selling. Under current market conditions, however, Sayers could have kept holding onto his investment by renting it out at a $1,250 monthly rental for three more years if he’d kept living there himself instead of selling.
“Had I used all my rent to reduce the mortgage balance to only about $40K today, I would now hold approximately 185,000 worth of equity if still living there,” states this homeowner.
Selling your home or renting it out: How to navigate the dilemma
Our two agents reached different conclusions when making their choice and came to regret their decisions. To help you figure out your optimal course of action in this conundrum, we categorized all important factors into two camps, renting signs vs selling them, which will hopefully facilitate making your own choice easier. However, you might check both boxes when considering which path is the most viable.
Signs you should rent out your home
Moody’s has revealed insights that indicate the residential rental market has seen steady improvement for some time, indicating rent growth may have stabilized at its current levels. Average U.S. rent was unchanged between quarter one 2024-2025. Real estate is always hyper so be sure to thoroughly research any decisions regarding renting.
Even in an otherwise competitive housing market, not every house makes for an ideal rental investment. Before becoming a landlord yourself, run your property through a “rental litmus test” to determine whether taking on tenants makes financial and logistical sense for both yourself and tenants alike. Below are just a few indicators that this might be worth your while:
Demand for rentals is high in your area
Monique Walker, an esteemed real estate agent and investment property specialist based out of Phoenix, Arizona has seen an upsurge in rental demand in her market; as a result, more owners have listed their properties with VRBO or Airbnb platforms for short-term rental opportunities.
“Rents have been increasing steadily,” Walker notes.
Rental demand often spikes in communities with fast job growth or significant new developments; when Amazon opened its headquarters in Seattle in 2010, median rental rates skyrocketed 41.7% during seven years versus just 17.6% nationally for that same timeframe.
Apartment List provides market reports in some of the biggest U.S. cities like San Francisco, Chicago, and Orlando to provide a better idea of rental demand in those regions.
You’ve always wanted to own rental property
Being a landlord might not be for everyone however, if managing and renting properties has always been something that you like doing, your passion can improve your chances of success as a property manager for investment properties.
Being a landlord offers many advantages. Renting properties can help build wealth and save for retirement; intangible benefits also exist, including taking more vacation time, learning new skills, and taking on challenging yet exciting opportunities. Some landlords also find great satisfaction in providing secure homes to people in need.
You have a personal attachment to the house
Have you been relocated for work reasons or other personal circumstances and don’t wish to permanently let go of your property? Converting it into a rental can be an economically sound solution to keep ownership until the time is right to return and turn it into something profitable again.
Your house offers appealing amenities to renters
Even if it no longer fulfills your needs, your property could still provide someone else’s dream home. If it offers features that set it apart from similar rentals and make it more desirable for renters, keeping ownership could be in your best interests.
According to a National Multifamily Housing Council (NMHC) survey of over 220,000 renters, the most desired features for rental home occupancy include in-unit washer and dryer facilities, air conditioning units with soundproof walls, high-speed internet connectivity access, and dishwashers. Pet-friendly rentals as well as flexible work environments were also highly sought-after features among renters.
Walker has found that short-term renters tend to prioritize factors like the number of bedrooms, access to swimming pool facilities, and stunning panoramic views when making decisions regarding short-term rentals.
Long-term renters’ wishlists tend to mirror that of homebuyers: location close to work and schools of high quality as well as desirable lots and locations with plenty of land for expansion or recreation. Furthermore, having newer fixtures, appliances, and flooring that is well maintained is also of high priority to long-term renters.
You’re confident you could make a profit
Decisions on when and why to rent out property come down to numbers crunching. Sayers provides an example when those numbers support renting:
Imagine renting your $250,000 house out for $2,500 monthly rent; or $30,000. Your mortgage payment would be $1,250 monthly while property taxes and insurance would total $400 monthly, providing a net cash flow of $850 (less any costs related to vacancies or maintenance).
Even though this appears like a reasonable profit, is it worth your while to rent out or sell now?
Imagine renting out your property would take seven years to generate $75,000 that you could generate by selling today, though during that period your equity should increase and so too would your potential profit when selling later on. While renting may seem inadvisable at first glance, keep in mind you could gain even more equity that way and ultimately increase the overall return from selling when selling later.
Sayers notes, that in seven years your equity in your property would increase significantly as tenants would have helped pay down mortgage balances on time, plus potential market equity would likely grow even further, much as Sayers experienced for his lost opportunity rental property.
Signs you should sell your home
At certain points in time, selling off a house might make more financial and logistical sense than keeping it. Here are a few signs it might make more sense for you to cash out your house:
It’s a “seller’s market”
Seller’s markets feature limited housing inventory paired with high demand from homebuyers, creating an optimal selling situation where your home receives high exposure if you decide to list. Homehunters with few choices available will give you plenty of attention, helping maximize the value of the sale.
For an in-depth view of your local housing market, head over to your Realtor(r) association website and review their most recent market report. Pay particular attention to inventory changes year over year. Lower inventories tend to indicate greater buyer interest unless purchasing yourself! Likewise, if your area has witnessed substantial price gains over several years now may be an ideal time to cash out and monetize that growth by cashing out.
A decrease in mortgage rates might stimulate more housing supply but at present sellers’ favor prevails significantly over buyers.
You couldn’t charge enough rent in relation to the home’s value
Kurzner notes that as home prices increase, rental properties become less desirable as their return on rent decreases. Gross Rent Multipliers (GRM), the ratio between real estate price and income generated, will become increasingly less effective as rent payments rise; for instance, you might rent out a $100,000 house for $1 per month (1%) but wouldn’t likely find one with 2 rental income streams (2 GRM).
“The higher the value, the flatter the rent curve becomes,” states Kurzner.
You don’t have enough liquid cash on hand
Sayers stresses the need to have enough liquid cash available in case a vacancy occurs and pay the taxes and mortgage payments associated with renting property; otherwise renting may not be suitable.
“Vacant rental properties not only result in lost rental income but still must pay their monthly property expenses and mortgage,” according to Hedges. Additionally, capital expenditures often need to take place before it can become rent-ready again.
Walker advises having at least $10,000 available as disposable income when renting out property; otherwise selling may be the more suitable course of action.
You have other priorities for the equity you’ve built
If you need cash quickly for a down payment on a new home and already possess significant equity in your current residence, selling may help you reach your goals more quickly than renting would.
CoreLogic’s Homeowner Equity Insights for Quarter 4 2023 show strong equity gains among U.S. homeowners – up 8.6% year over year on average over the 2023-2024 period; an individual homeowner typically gained $24,000 of equity between the 2022-2023 period; with Rhode Island, New Jersey, and Massachusetts experiencing particularly impressive increases.
The age of your property raises maintenance costs and concerns
As part of managing a rental, there’s always some form of regular maintenance required, including faucet leakage and water heater issues, ant colonies moving in, etc. According to Thumbtack, an affordable home improvement tech platform, home maintenance cost $6663 annually in Q4 2023 — an 8.3% increase over what was spent annually during Q4 of 2022.
Property that is newer or well-maintained tends to be easier to manage, making renting less appealing due to potential maintenance and replacement costs that could become burdensome over time. If your rental home features original components such as an HVAC system, roof, appliances, etc, then managing can become much less desirable due to these expenses.
Walker frequently sells older properties due to this reason; homeowners would much rather sell as-is in today’s hot market than face the potential cost of repairs in the future.
You’re not thrilled about becoming a landlord
A property that is rented out can offer additional an efficient stream of income However, this has an array of costs such as maintenance and repairs and the search for appropriate tenants, following regulations in addition to paying the tax. These all must be met for the property to remain profitable and bring returns for you and its landlord alike.
Landlords who prefer a less hands-on approach may benefit from hiring a property management firm to find quality tenants and field emergencies like when the heater goes out in subzero weather. All at an estimated 8%-12% cost, which may cut into your profits.
As more landlords take on property management on their own nearly half opt for this route. Kurzner cautions them about potential legal and operational ramifications that they could encounter when doing it themselves.
At its core, landlords’ obligations consist of offering rental properties that are safe and suitable to live in, from safe drinking water and heat/hot water availability, carbon monoxide detectors, secure doors/windows, and an adequate sanitary unit to name but a few considerations.
If all that sounds overwhelming and you are unwilling to assume all the additional time, expense, and risk associated with owning rental properties, selling may be your better choice.
It’s just not a “good” rental
Sometimes the stars align perfectly for landlords when selecting rental property that will yield great returns easily renting to reliable tenants with reasonable operating expenses and offering excellent yields. Unfortunately, this is not always the case!
Kurzner owned rental properties that became too burdensome and financially draining to maintain; as a result, he decided not to keep them as part of his portfolio and sold them instead.
“Generally, it may be wiser to sell and find another property if a home that you rent consistently experiences vandalism, poor tenants, costly maintenance expenses or excessive HOA dues are an ongoing source of concern,” according to his advice.
Should you sell your home or rent it out: It all comes down to numbers
As part of your decision between renting out or selling, many factors need to be taken into consideration in weighing rent vs sell. At its core lies this simple question: which path leads to greater earnings: selling or renting? After crunching some numbers you can evaluate if renting is worth its monthly revenue streams vs potential hassle.
To assist with this calculation, the National Association of Residential Property Managers’ Rent vs. Sell calculator can provide invaluable help. Simply input some basic details like mortgage payment amount and taxes as well as the rental rate desired and get instant results!
Keep expenses like taxes and insurance premiums in mind when budgeting. Property taxes vary widely by location; landlords can deduct some operating costs such as repairs, premiums, and mortgage interest from their taxable income each year as deductions from operating costs such as maintenance/repair expenses/mortgage interest/maintenance & repair bills from their total operating cost totals.
“To determine whether selling or renting out is best, first set out your goals: how you intend to spend any proceeds from sale vs how to manage a house if rented; then move forward accordingly,” advises Kurzner.
Although conducting your research can be useful, consulting an established real estate professional for advice can also be very valuable in understanding local market factors, whether or not your house would make a good rental, and its true market value.
Conclusion
Deciding between selling or renting your house depends on various considerations. These could include market conditions, rental income potential, your comfort as a landlord, and plans for the property. By carefully considering all these variables and crunching numbers to come to a decision that meets both your financial goals and overall situation. Don’t hesitate to consult a real estate professional who can guide you in successfully navigating local markets to maximize return on investment returns.
Read More: When a rental property is sold
