Should I sell my house or rent it out?
If you are asking yourself this question, don’t take it lightly. If you’ve never been a landlord before, renting a house can be an “enlightening” experience. If you have owned rental property before and are thinking about selling, you likely have different thoughts going through your head. As a professional real estate investment company in Oklahoma, we understand your situation and have helped many people determine if they should sell their house to us or rent it out.
We are going to give you the ups and downs of both scenarios whether you rent or sell. Hopefully we’ll help you answer the question of, “should I sell my house or rent it out?”
Option 1 – sell your house
If you are thinking about selling your house, you need to understand 2 things:
- Your options for how to sell a house and costs/time associated
- What you need the money from the house for
You have 3 options to sell a house. Each have different benefits and negatives. One might take longer and require up front money but yield you more. Another might be quicker but result in less money. Only you can know how quickly you want to sell, how much work/time/money you want to put into the house, and what you are prepared to deal with. Here are your 3 options:
- Sell with a real estate agent – pay 6% commission, pay closing costs, you’ll have to make repairs/updates to house to get top dollar and reduce time on market, it will likely take you 2-6 months but you make the most money.
- Sell it by yourself – you pay 0% or 3% commission (3% if an agent brings you a good offer from a qualified buyer), pay closing costs, still have to make repairs/updates, might take you 2-8 months, you are also on the hook for all the paperwork, buyer showings, and marketing of your house.
- Sell your house to a home buying company – like us! You sell the house in 2-3 weeks, pay no closing costs and no commissions, you also don’t have to make any repairs or clean anything but you take home the least amount of money from these 3 options.
The second thing you need to figure out is what you need the money from if you did sell the house. Do you have debt to pay off? Want to buy a new car? Or, would it just sit in your bank account?
Why do you need to know this? Well because there are 2 ways you can get paid when you sell your house. This sort of works like choosing how you collect your money when you win the lottery. Hear me out. Those options are:
- Lump sum – this is the only option most people understand and see in their lifetimes. You sell a house, you get a big check. End of story. The best you can do here is get full market value at time of sale for the house.
- More money over time – You get some money up front then the rest over time monthly. In the end, you get a lot more money but it just takes longer to get it all.
So, if you want to sell your house, figure out how you are going to sell it and what you need the money for. This will give you the best path to selling your house. However, if you’ve thought about renting it….
Option 2 – rent your house
In the big question of should I sell my house or rent it out….renting is the riskier option. We’ll keep this short and sweet. If you plan to rent the house, you will have a long-term income-generating asset to help fund your retirement or lifestyle or pay your bills. This is true only if you manage that house correctly. To do this, you have to know your numbers.
Rental property comes down to the numbers. Taxes (get from county), mortgage payment, insurance (ask insurance provider for quote), vacancy (6% in hot area, 12% in lower income area), repairs (10% of monthly rent), capital expenditures (5% of rent for big ticket repairs like roof), rental income (use Zillow or Craigslist to see what rents are)….these are all numbers you can either know exactly or accurately estimate. If you are being honest with yourself, you factor in all those numbers when thinking about renting a house to someone.
Here are some quick things to think about when renting a property:
- The value of the house will likely increase over the years – …..that is, if you keep it in good shape and the market keeps going up and the house is not in a war zone of a location. However, over the years, property values rise. If you rent a house for 20 years but don’t update it and make minimal repairs, you have basically erased that appreciation and increase in value. While house values do go up over time, those values are also affected by the condition of the property. You can’t only factor in the positive forces on the value of your house. I say this because if you don’t invest money back into your rental house, you likely won’t see the value increase.
- Stick to your numbers – the numbers mentioned above. Learn them, love them, stick to them.
- Learn to screen tenants – If you don’t screen tenants properly, you will lose money in the rental game. You’ll get a tenant in the house that will stop paying rent or destroy the house. If you have a mortgage on the house, you are likely making anywhere from $100-$400 per month in income after all the expenses mentioned above. How many months of rent would it take to make up for $5,000 in repairs after a bad tenant destroys a house?
Should I sell my house or rent it out?
Well, did you decide yet? If you have or haven’t, give us a call and we’ll talk you through both options. Our company buys houses as a business so if you decide to sell, we’ll buy it. If you don’t, we’ll at least help you figure out the rental side.
You can call/text us anytime at 405-673-4901. You can also fill out the form below to get a response from us within 24 hours.