If you want to buy a new house but you already own a house, should you sell your current house or rent it out?
You may be worried that you won’t get the money you want out of a home sale. There are a few things you need to consider before you go ahead and rent your current property.
First, talk to your lender up front to make sure that the rental amount you’ll get for your home is going to meet the requirements that you need in order to purchase your next home. Not only do you have to consider what the price is, you also have to consider what the price is compared to your mortgage.
You also have to look at the occupancy rate. Lenders often use a discounted number in case you don’t have occupants year-round. Since you may not have a 100% occupancy rate, your lender is going to use a number that is different than just taking the rental rate times 12.
Make sure that your lender approves of your plan and that renting your home makes sense financially. We can get you comparable rental rates for your neighborhood to give you an idea of what that rental price would be.
Make sure that you factor in your risk.
Secondly, make sure to consider your risk. When you sell your home, it’s no longer yours. You don’t have to worry about a thing. If you rent your home out and the air conditioner breaks, the roof leaks, and the stove stops working, those are all your responsibility.
Make sure that your carrying cost and risk tolerance is set up so that you can afford those repairs. There are things like home warranties that can help you, but you have to think of all the costs you’ll incur and the age of your appliances and mechanical systems in your home in order to make the best decision.
As your Realtor, I can help you by analyzing those numbers.
You also have to ask yourself, “If I leave my money in this house, am I going to get the return that I could get somewhere else?” If your home does get the return you want, that’s ok. You just have to look at it analytically to make the right decision.
Finally, keep in mind that you will be the person in charge of the house. It’s up to you to make sure that the rent is paid on time. If it’s not, you may have to go to small claims court. There are a number of rules and regulations about what you can and cannot do as the owner of a rental property, so make sure you talk to me first. I can help you make the wisest decision for you and your family.
If you have any other questions about buying or selling a home, just give me a call or send me an email. I would be happy to help you!