Should I Sell My Home Or Lease It? - Article Banner

Typically, you’ll decide whether to sell your home or lease it out based on how the market is performing. There’s generally a clear idea of whether you’re better off in the sales market or the rental market. 

In today’s real estate market, it’s a bit of a gray area. 

How gray? That depends on the property you’re selling, the price you’re asking, and the type of buyer you’re likely to attract. 

While a year or two ago selling might have been the easy answer, today we have some different circumstances. We have rising interest rates. We have an uncertain economy beset with inflation and in some industries, a labor shortage. 

What to do? 

Let’s take a look at some of the considerations that will tell you whether it’s better to sell your home or hold onto it and lease it out.

Consider Selling Your Kansas City Home

Real estate sales have slowed. In some markets, they have slowed dramatically. In other markets, like ours, the slowdown is more subtle. 

There’s still plenty of opportunity to sell your home and make some money. The inventory is not quite as competitive, the sales prices are peaking but still higher than they’ve been, and there’s a pool of buyers who are either paying in cash or willing to take on a more expensive mortgage for the right home. 

If you have the right home to attract those buyers, you’re in a strong position to sell. 

Here are some of the benefits to selling your home. You might have considered these already, but they are good reminders of why it’s still a market in which you can make a profit on your home:

  • You walk away with some money. Prices are still at a very comfortable point for sellers, and when you list your home, you get to cash out all the equity that you have in the property. This is a good time to get your asking price. If you know you’ll make a lot of money and you have reasons for needing to get your hands on that cash, selling is obviously a great idea. 
  • You can perhaps preserve the homeowner tax exemption. 
  • You’ll relieve yourself of the liability that comes with leasing out a property. You won’t have to worry about tenants or maintenance or vacancy. 
  • You can use the money you earn on your sale to invest in a more passive asset like stocks, bonds, or something else. You open yourself up to some options that you don’t have when all of this money is tied into your home.

When you need money right now and you are not ready to be a landlord, selling is likely your best option.

Benefits to Holding Your Kansas City Home as a Rental Property

Why might you hold onto your home and lease it out?

There are several excellent reasons to keep your property as an investment property. Especially now, when rental prices are soaring, well-maintained homes are in demand, and tenants are competing with one another to lease the best properties.

You might also keep your home and lease it out if you’ve considered investing in real estate before but you weren’t sure you had the capital to get started. Now, you have a home that you already own. You can lease it out and use this one asset to launch a larger real estate investment operation. You could begin here and grow your portfolio over time, as it makes sense.  We have owners who started with the family home, leased it out, bought a 2nd home, moved and leased it as well.  It could take as little as 10 to 20 years to have a built in retirement.  

Let’s take a look at some of the best reasons to hold and lease out your home:

  • Owning a rental property will allow you to diversify your investment portfolio. Rather than having all your investments in stocks or bonds or a 401k plan, you’ll have real property. This is a tangible asset that’s still at the mercy of the real estate market, but maintains a value that doesn’t fluctuate as wildly as a stock. You cannot live inside a treasury bond.  
  • You’re earning monthly, recurring rent. As long as you can keep a good tenant in place, you’ll collect rent every month which can contribute to your mortgage, taxes, insurance, and other expenses. At some point, you will begin earning more than you need, and that positive cash flow will lead to big earnings. Meanwhile, your tenants are paying down your mortgage.  

There are also taxes to think about. 

When you own an investment property, you can take several tax deductions and enjoy tax benefits. Most owners will deduct depreciation, interest, operating expenses, and maintenance.  

Prices for everything are higher right now, and owning real estate is a great hedge against inflation. With a fixed rate mortgage, your payment stays the same. Even as you’re able to increase your rent.

Consider Property Condition

The condition of your property will also impact your decision about whether you should lease the home or sell it.  They’re looking for a modern home that looks and feels new.  If you’ll need to invest in a lot of maintenance and some cosmetic upgrades, you might sell it as-is instead of renovating in order to make it ready for the rental market. However those renovations and improvements will increase value and raise rent, thus letting the renters pay for your improvements. 

Contact Property ManagerIf you need some help deciding what to do with your Kansas City-area home, contact us at Key Partners Property Management. We can make some recommendations unique to your present situation, and we’ll help you navigate the process of listing it on the sales or rental market.