Move-up buyers: Should you sell or rent your existing home?

If you own your home and want to buy a new residence, you may wonder whether you should sell your existing house or keep it and rent it out.

Perhaps you want to use your equity to pay for your new home or maybe you want to use your house as an investment property with a long-term income stream.

Here are key questions to consider as you make the decision.

What’s the market like?

First, you need to consider the long-term profitability of your existing residence. Is the property in a high-growth area? Is the neighborhood headed up or down? What are the long-term job and population prospects?

For an investment, you’ll want your property to have a steady flow of renters along with increased value over time. Make sure to analyze the long-term demand for homes in your area, both in the purchase and rental markets.

Additionally, you’ll want to look at economic data and ask your Realtor for information about real estate conditions in your neighborhood. Find out how fast homes are selling or renting.

Can I afford it?

Start by deciding how you’ll pay for the down payment on your new house. Do you have money saved up that you could use or are you relying on the proceeds of your sale?

Financing the properties is another consideration. You may need two mortgages if you’re not close enough to paying off your existing house. Talk to your lender about whether you qualify for two loans.

Finally, you need to consider whether you have enough money to pay for the unexpected challenges of being a landlord. Do you have funds set aside for unexpected repairs? Could you make the mortgage payment if you have several months between tenants?

What’s my return?

You’ll need to crunch the numbers to see if owning an investment property makes sense financially.

Determine the monthly rental rates for comparable properties in your neighborhood and ask your financial advisor to create projections for how much you could expect to make. Also, talk about whether owning the property could factor into your long-term retirement planning.

Make sure to consider the numerous tax benefits of owning an investment property, including deductions for depreciation, property taxes, mortgage interest, maintenance and more. Factor in this favorable tax treatment in your calculations.

Finally, ask your financial advisor about your other investment options like the stock market. All things considered, is this the best return based on your investment objectives?

Am I ready to be a landlord?

Even if the returns are favorable, you still have to decide whether you’re up for the headaches of being a landlord: screening tenants, managing inconvenient repairs, risking damage to your property, etc.

If you’d like to keep the property but don’t want the hassles, you could also consider hiring a property manager to take care of these services for you.
Do I plan to move back?
If your move is for temporary reasons, you may want to rent out the home. You could save money on closing costs and other transaction fees by keeping the home if you plan on eventually returning.

If that’s not in your future, you may want to sell the home and move on.

Do I have a team of experts?

Owning more than one property includes risks and opportunities. As you decide whether the investment makes sense, you’ll want to talk to many professionals along the way, including a lender, property manager, attorney, financial advisor, tax expert and Realtor.

To learn more about market conditions and other information about buying, selling and investing in real estate, contact a local Realtor. Find one at