It’s a fact of life. Things change—and so do our needs and lifestyles. For many homeowners, these shifts mean saying goodbye to the starter home and hello to a place that suits them better.
If you find yourself in this situation, you may be wondering whether to sell the property you’re living in now, or hold onto it and rent it out. Both options come with pros and cons, so let’s take a closer look.
Renting Out Your Property
Real estate can be an amazing investment, especially in a hot rental market. If you decide to rent out your home when you move, you’ll enjoy some extra income every month—and build equity while your renters pay the mortgage. Sounds like a win-win, doesn’t it?
Of course, nothing in life comes for free. Yes, your home’s value will almost certainly appreciate over time, and it’s going to feel pretty good to cash your first rent cheque. But this isn’t a step that should be taken lightly, so make sure you ask yourself the important questions.
Do you really want to be a landlord?
Managing a property can be time-consuming, and it will definitely take planning on your part. From finding a good tenant to dropping everything to perform repairs, think about whether you have the time and energy to get hands-on. Of course, if you don’t see yourself doing that, you can always think about hiring a property manager. Just be aware of the bite it could take out of your income.
You’ll also want to make sure you keep things legal, which means reviewing the Residential Tenancies Act and talking to a real estate lawyer.
Is it worth the financial gain?
If you think you’re up to the task of being a landlord, the first step is understanding what your finances will look like in the short term. Ideally, you want the cash you bring in to cover the costs of the property. Along with your mortgage, it should (hopefully) pay for property taxes, insurance, and ongoing maintenance.
Start by getting a sense of what other landlords are charging for local homes like yours. Once you have a good idea of how much you can ask for, you can start tallying up your expenses and figure out whether renting will actually put more cash in your pocket. Oh, and don’t forget that you’ll need to cover the mortgage between tenants—so you’ll want to account for that when you’re budgeting.
Are you willing to improve your property?
Most homes could use a little love before they go on the market, and the same is true of rental properties. The difference is, if you’re a landlord, you’ll be responsible if the newly-fixed faucet or door falls back into disrepair. In other words, you’ll want to put some extra time into making sure any work on your home is done right.
Ready to learn more about selling? Check out some of my recent buying resources below:
Selling Your Property
While it may be tempting to hold onto your first home, there are times when selling it may be the better option. If you don’t want to take on the responsibilities of being a landlord or the math doesn’t work in your favour, it might make sense to work with a local agent to get a great sale price now.
There are two other situations when renting out your first home may not be worth your while:
You need money soon
Let’s face it: sometimes, you need to get your hands on some cash quickly. For example, if you’re going to need the money from your home sale to purchase your next place, you’re not really in a good position to hold onto it as an investment.
One other thing to consider is taxes. Once your home becomes an investment as opposed to your primary residence, you’ll have to pay capital gains tax when you sell it.
It doesn’t make sense to rent in your area
While there’s no shortage of renters in The GTA, you’ll want to make sure there are plenty of them in your neighbourhood. No matter how great your home is, it needs to be conveniently located for potential tenants. To find out whether that’s the case, you may need to do a little digging. If all else fails, ask a real estate agent who knows your community.
Does selling your home make more sense than renting it? You can learn more about what the process will look like with me right here!
Making The Right Decision
If you’re thinking of renting out your first home when you buy a new one, there’s no shortage of reasons to go for it. From long-term appreciation to ongoing passive income, a rental property offers many benefits.
Of course, it’s not the right choice for everyone. Before you take this step, make sure you look closely at your situation—and decide whether the pros outweigh the cons.
Want to learn more about selling vs. renting? Send me a message and we can set up a time to chat!
Interested in learning more about selling?
Get in touch to learn more about the process—and how I can help!