Renting vs Selling
You've been thinking about selling your condo, for whatever reason. Maybe relocating for a new job or maybe you have a baby on the way and need extra space. Or maybe you just want a change. But anyway, you've decided to move, which means you need to sell your current home.
Or does it?
What if, instead of selling your current home, you just rented it out instead? You could buy a new place, make rental income from your old place, and live like the king and/or queen of France. Or Denmark. Really, the country isn't important here. The important thing is: does it make more sense to sell your home, or rent it out?
Pros and Cons of Renting Out Your Home
There are advantages and disadvantages to renting out your home. Here are a few of the big ones.
Profit: Cash. As long as the rent you charge covers your mortgage and expenses, you can make a steady profit off your rented home.
Avoiding a Weak Market:If it's a buyer's market, you might be looking at a struggle to sell your home. Maybe you won't make as much money as you want to. By renting, you can ride out the weak market until homes are fetching a better price.
You Can Sell Later: Rent your home out, and you can potentially make money twice: once by renting, and again by eventually selling. And the home might continue to appreciate in value as you rent it out.
New Opportunity: Once you gain experience renting out your home, you may find it much less intimidating to renting out other income properties. Renting out your own home will give you a chance to explore the world of real estate investing, without the work of searching for properties.
Taxes: You have to pay taxes on rental income. You can deduct certain expenses, which may or may not offset the extra taxes you'll need to pay.
You're a Landlord: Leaky sinks. Tenant disputes. Property damage. Lawsuits. As landlord, you're now the proud owner of all these potential problems. You'll also need to find new tenants when the old ones move out, or you'll lose money every month on your vacant home.
More Taxes: When you sell a primary residence and buy another, you get a nice fat tax break from the government. But if you're selling a rental property, you'll have to pay capital gains taxes on that income.
Condo Restrictions: If you own a condo or co-op, you may not be allowed to rent out your home, or you may be required to adhere to specific renting guidelines. You'll need to check with your own condo association, since every association is different.
As with any serious financial and tax-related subject, we strongly advise you to get advice from a tax professional or an accountant.