Deciding whether to sell or rent a home can be a complex and challenging choice. The best option for you depends on various factors, including your current situation, future plans, the property’s condition and location, and the state of the housing market.

To make an informed decision about whether to sell or rent a home, you’ll need to research and carefully weigh the advantages and disadvantages of each option.

If you’ve never been a landlord before, renting out your house requires serious consideration. Being a landlord involves numerous rules and regulations, and setting up as a landlord can be quite complex.

If you’re caught in the dilemma of whether to sell or rent a home, here are some factors to consider, including the costs.

Sell or rent my house?

A home is often the largest financial asset individuals possess, so deciding what to do with it is a significant decision. To either sell or rent a home have their advantages and disadvantages: Selling provides a substantial lump sum of cash, whereas renting generates a steady stream of smaller monthly payments from tenants. If you have another place to live and can manage to keep the house, renting allows you to keep building equity as property values rise. Consider the following scenarios to help you decide which option is best for you.

When selling your home is the right decision

If you need the cash to pay for your next house

If you need the funds from your current home to purchase a new one, selling is the most practical choice. By selling, you can use the proceeds as a down payment on your new home. Managing the sale of your current home while buying a new one can be complex, so it’s essential to work with an experienced real estate agent to help navigate the process.

If you have no desire to become a landlord

Managing a rental property can be both time-consuming and demanding. Are you skilled at making repairs yourself? If not, do you have access to a network of affordable contractors for when issues arise? Think about whether you’re ready to assume the additional responsibilities of being a landlord or if you’d prefer to hire a third party to handle these tasks.

If you stand to gain a substantial profit

Property values have increased nationwide in recent years, and home prices are still elevated. Depending on factors such as how long you’ve owned your home, its original purchase price, and the strength of your local market, selling might yield a considerable profit. Check nearby real estate comparables to see the selling prices of homes similar to yours.

When renting out your home is a viable option

If your move is only temporary

If your move is temporary and you plan to return to your current city in the future, keeping your home and renting it out during your absence might be a good option. Having a place to come back to offers peace of mind, and considering closing costs, it could be more cost-effective than selling now and buying another home later.

If you want the rental income

Extra income is tempting, but if you choose to rent out your current home and buy another with a mortgage, remember that lenders will factor in rental income when assessing your financing. Often, only a portion of your rental income will be considered as part of your total income. Additionally, you’ll be responsible for two mortgages simultaneously, so ensure you can manage this financial commitment.

If you anticipate that home values will increase in your area

It’s impossible to predict the housing market’s future with complete certainty. However, you can make an educated guess. If you believe that the value of your current home will rise within the next few years, you might consider renting it out now and selling later to benefit from potential price appreciation.

Selling vs. Renting Your Home: Key Costs to Evaluate

Whether you choose to rent or sell a home, both will involve costs. A crucial consideration is whether the rental income will be sufficient to cover the property’s mortgage and maintenance expenses.

To estimate potential rental income, review the rates for similar properties and compare them with the costs of owning and maintaining your property. This will help you assess whether you can cover your expenses and possibly generate a profit.

Costs of renting out a home

Mortgage

Even with rental income, you’ll still be responsible for paying the mortgage, which might not be entirely covered by the rent you receive. The same applies to property taxes.

Maintenance and repairs

To keep the home in good condition for tenants, you’ll need to stay on top of routine maintenance. As a general guideline, set aside at least 1 percent of the home’s value annually for maintenance, with a higher budget recommended for older properties.

Finding a tenant

To attract a tenant, you’ll need to actively promote your property. Factor in potential marketing expenses, such as placing advertisements. Additionally, you may need to cover the costs of background and credit checks for prospective renters, although you might be able to have the tenant reimburse this minor expense.

HOA fees

If your home is part of a homeowners association, you’ll also need to cover HOA fees, which can vary significantly based on the amenities provided.

Costs of selling a home

Agent commissions

Traditionally, real estate commissions have ranged from 5 to 6 percent of a home’s sale price, with the fee split equally between the seller’s and buyer’s agents and paid by the seller. However, recent legal changes settled by the National Association of Realtors are set to alter this practice. Starting this summer, buyers may be required to pay their agent’s commission directly, depending on the specifics of the transaction. Nonetheless, a single agent’s fee remains a significant cost— for instance, 2.5 percent on a $400,000 sale amounts to $10,000.

Closing costs

Sellers generally face additional closing costs beyond Realtor commissions, including attorney fees, transfer taxes, and title insurance.

Mortgage payoff

If you have an outstanding mortgage on the home, a portion of the sale proceeds will be used to pay off the remaining balance of your loan.

Sell or Rent My House: Which Option is Better?

So, should you sell or rent a home? There’s no one-size-fits-all answer—it really depends on your personal circumstances, financial goals, and willingness to take on landlord responsibilities.

If you’re enthusiastic about generating passive income and building long-term wealth, renting might be the best option. On the other hand, if you need immediate cash or prefer not to deal with tenants, selling could be the better choice.

Regardless of your decision, real estate can be a valuable asset in achieving your financial objectives. Whether you choose to sell or rent, you’re making a wise decision by exploring all your options.

Bottom line

Deciding whether to sell or rent your house involves careful evaluation of your financial situation, lifestyle, and local housing market. To make an informed choice, consider the costs associated with each option, whether you plan to return to your current location in the near future, and if you’re interested in taking on the responsibilities of being a landlord.

If you’re looking to sell your house for cash or if you don’t want to handle the responsibilities of being a landlord, reach out to Illinois Real Estate Buyers. We buy properties as-is and we buy properties from landlords who don’t wanna handle unpleasant dealings with tenants anymore.