The U.S. is short 6.5 million single-family homes, according to a realtor.com report released March 8. This means that the rate of household formations is outpacing the amount of homes constructed, and that spells a major inventory crunch for buyers and renters.
Given the current climate, some homeowners might be weighing whether now is the right time to sell their home, or rent out their home instead.
Before putting your home on the market in either scenario, there are certain factors one should consider:
— Mortgage rates are still high.
— Being a landlord is a big commitment.
— Length of time for your move.
— Market factors.
— Laws in your state.
[Read: Should You Rent or Buy a Home?]
Mortgage Rates Are Still High
The average interest rate on the popular 30-year, fixed-rate mortgage is in the high 6s, the highest we’ve seen in several years. Simply put, that increased monthly payment means people cannot afford the same amount of house they could a few years ago.
In fact, many owners are choosing to stay in their current homes because if they sell, they will be priced out of their own market and this is contributing to the housing inventory crunch nationwide. If selling your home means you are not able to buy something else you love equally or more, then renting may be the better option until sale prices have dropped.
Being a Landlord is a Big Commitment
Finding a qualified tenant to rent your home is just the beginning of the landlord-tenant relationship. As a landlord, depending on the terms of the lease, you will likely be responsible for repairs and maintenance, landscaping, structural issues and more.
If you aren’t prepared to be on-call to field panicked phone calls from your tenants, or pay a property manager to take on these duties, then renting out your home may not be the best choice for you at this time.
Length of Time for Your Move
If you are planning to put your home on the market because you’re moving for a period of five years or more, then selling could make more sense than renting out your home. You can use the profit from the sale to purchase a new home, which helps to offset financial losses and build equity over time.
However, If you are moving for a short duration and know you will return at some point, then renting out your home could ease the stress of having to go through the homebuying process multiple times over. Remember, getting out of a lease is far easier than getting out of a mortgage.
[Read: Considerations Before Buying a Vacation Home.]
Market Factors
If the rental market in your area is booming but the sales market is lukewarm, then now could be a great time to capitalize on the momentum. If you live in a neighborhood where demand has simply exploded and finding a tenant will be fast and easy, then renting could make a lot of sense.
If you are still paying down a mortgage, make sure your asking monthly rent is more than your current monthly mortgage payment so you earn a profit in the process. Speak to a real estate professional to find out the rental comparatives in your neighborhood so you can make an informed decision.
Laws in Your State
If the coronavirus pandemic has shown us anything when it comes to renting, it’s that the relationship between tenants and landlords can dissolve very quickly. When a tenant signs a lease they are, in most cases, obligated to pay rent in a timely manner and keep the home in a certain condition. Not doing so can result in penalties, housing court or even eviction.
However, in some states, getting rid of a nonpaying tenant is not so clear-cut and landlords could inherit a financial mess. Hire a real estate attorney to walk you through the laws in your state so you have the knowledge to handle challenging situations. You’ll also want to know your minimum obligations as a landlord.
[Read: The Rise of Built-for-Rent]
The truth is, there is no right answer to the question of whether one should sell or rent. It all depends on life circumstances, finances and personal choice. Selling a home is seen as more of a long-term option, while renting is viewed as temporary. The main takeaway no matter what you decide is to thoroughly research your market, compare it with your current and long-term financial needs, and work with a real estate professional to help navigate the process.
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Is Now A Good Time to Sell or Rent My House? originally appeared on usnews.com
