Very few homeowners will live in a single property for their entire life. For most of us, the time will come when we decide to say goodbye to our first home to move into our forever home or embrace a change in lifestyle or scenery.
If you’re in a strong financial position when that time arrives, it can be difficult to know whether you should sell your first home or hang onto it as an investment.
If you’re comparing selling a house vs renting it out, this guide provides an overview of some of the major benefits and downsides associated with each option to help you decide which will be the smarter move.
Renting vs selling pros and cons
Renting it out
The most significant benefit of holding on to your property is the potential to increase your personal wealth from the cash flow you can generate from rental income, as well as the ability to build more equity. If the market value of the property is likely to continue to increase, there’s great potential to benefit on both fronts.
On the other hand, deciding to rent out what was your primary place of residence can have some negative tax implications. While homeowners are exempt from having to pay capital gains tax on the family home, that exemption doesn’t apply to investment properties. You’ll also be liable to pay tax on the rental income.
The major benefit of selling your home is that you can cash in on previous market growth and free up capital for other things. This can mean less financial stress compared to managing the costs associated with owning multiple properties.
However, selling a property which is likely to continue to increase in value can mean you’ll miss out on future capital growth. If you decide to sell and purchase a different investment property, you’ll also be liable to pay stamp duty or land tax on the new property.
The emotional aspect of selling the family home can also be difficult for many homeowners who have years of cherished memories of living in the home.
Selling house vs renting it out: Deciding which option is right for you
Considering the following factors may help you decide which will be the smarter option for you:
- Whether you’re in the financial position to manage the costs of owning multiple properties.
- Your stage of life and whether you need to free up capital.
- The health of the rental market and the likely rental return.
- The suitability of the home as an investment property.
- The price you’re likely to achieve if you were to sell.
- Whether you want to be a landlord.
Ultimately, your decision needs to make financial sense based on your individual circumstances, so it’s always a good idea to seek professional financial advice to fully understand the financial implications of each option.
We can help no matter what you decide to do
Whatever you decide to do, PropertyNow is the easy and affordable way to manage the process yourself.
We can help you sell your property privately to save on exorbitant agent commissions, or if you decide to rent out your property, we also make it easy to advertise the property and start generating rental income.
Sign up with PropertyNow to get started.