Should I Rent Or Sell My House

This is an ongoing subject for debate “should I keep my house and rent it out or sell it instead?” As you’ll soon figure out, there are pros and cons to each option. But before you can decide, you should understand what you’re getting yourself into. Being a landlord isn’t easy, but it is nice to have a little extra cash coming in from your rental. Selling wouldn’t be a bad idea either, you wouldn’t have to deal with tenants and may be able to sell for a profit if the housing market is hot in Memphis. To help you decide we’ll cover all you need to know to figure out which is the best solution: renting or selling your house. 

What To Choose: Renting or Selling Your House?

Sell or Rent house on blackboard

Should You Rent Your Home?

If you can afford to keep your house and rent it out, that may not be a bad idea. A rental property could bring in some extra income every month and be a good way to pay down the mortgage. However, you’ll need to decide how you’re going to manage the property if you will hire a property management company or manage it yourself. You will need to screen potential renters to make sure you will have a good tenant. It would also be smart to get a lease agreement drawn up from an attorney and learn more about landlord and tenant rights in Tennessee

Being a landlord may be more involved than you think. Here are some other pros and cons to renting a house that you may not have thought about. 

Pros:

  • Extra monthly income
  • Someone is taking care of the house, and it’s not sitting vacant.
  • The tenant is helping to pay down the home loan. 
  • You don’t have to list the property and wait for it to sell.
  • If your move is temporary, it may be a good idea to keep the house and rent it out until you move back.
  • If you’ll have to pay capital gains on the sale of your home, holding on to it for longer than two years will reduce what you would owe. 
  • If you’re underwater on your mortgage, waiting until your home value increases would be helpful.  

Cons:

  • Possibility of having a bad tenant or tenants.
  • Possibility of missed rent and having to cover two mortgage payments.
  • Possibility of destruction to the property by the tenants.
  • Dealing with vacancies.
  • Having to handle emergencies that could pop up at any time. For example, if the HVAC isn’t working, if there is a leaky faucet or clogged toilet. 
  • Evictions are currently on hold for non-payment because of COVID-19, which means you wouldn’t be able to evict your tenant for not being able to pay rent. 
  • Paying a property management company may be expensive; however, they will handle issues with the tenant or random maintenance calls.

You’ll need to weigh the pros and cons and decide if renting your house out is best for you. Some landlords would probably tell you that it’s great and not a big deal. Others may say differently. No matter what, you’ll need to think through how you’ll handle late payments or missed payments. Ideally, you will want to have some extra money set aside to cover rent for several months if need be. 

You’ll also need to figure out how you’ll handle calls if you live out of state or a distance from the rental. If you have a property management company, they should be able to address these issues, but if you’re doing it all, you’ll need to be able to handle unexpected emergencies. Again you’ll need to have extra money set aside for emergencies or maintenance problems. 

Should You Sell Your House?

The other option you can look into is selling your house in Memphis. The housing market in the area is doing well and is a great time to consider selling your property. However, selling a home isn’t the easiest thing to do. You may be surprised what all goes into the process. Check out some of the pros and cons to see for yourself if selling your house would be an ideal solution.

Pros 

  • Ability to make a profit upon the sale of your home because the housing market is currently doing well. 
  • Ability to use the equity towards the purchase of your next home.
  • If you’d prefer not to be a landlord.
  • If you’re in pre-foreclosure or considering filing for bankruptcy. Selling would be better than ruining your credit. 

Cons 

  • If you need to make major repairs to your home to get it ready to sell.
  • If you need to sell right away- currently, it takes 34 days to get an offer on a house in Memphis and 30-60 days to close. 
  • If you’ll owe short term capital gains.

Renting Cost Vs. Selling Cost

Whichever option you choose does include costs. You may think the selling costs may be less than rental costs or vice-versa, but both have expenses to consider when deciding between renting or selling your house in Memphis. 

Cost of Renting:

Mortgage- Although you will be renting your house (and hopefully generating income), you’re still responsible for ensuring the mortgage is paid, which may not be entirely covered by the rent you receive.

Home Maintenance and Repairs- You still own the property, so you’ll need to keep up with routine maintenance to ensure it’s fit for tenants. A good rule of thumb is to budget at least 1% of the home’s value every year (more if it’s an older property) to pay for routine maintenance. You’ll also need to budget for repairs and replacement of essential parts of the house, such as appliances, doors, windows, and the roof.

Property Taxes- Although Tennessee property tax rates are pretty low compared to other U.S. states, you should still keep the costs of these in mind. Also, you can expect the rate to increase as your home’s assessed value rises. Click here to calculate your property taxes in Tennessee.

Advertising- To find a tenant, you’ll have to get the word out. The cost to do this will vary depending on where you advertise, such as in the newspaper or on a website, and whether you work with a realtor to market the rental listing.

Background and Credit Checks- Every credit and rental history report you run for a potential tenant (also known as tenant screening) will cost you — though you may be able to pass this expense onto the tenant. The cost generally ranges from $15 to $40.

Property Management Fees- If you need to hire a property manager, that will cost you, as well. These companies tend to charge a percentage of the rent price, typically 10%.

Tax Filing and Accounting Fees- Even if you do your bookkeeping for expenses related to the rental, you will likely incur costs for filing taxes using tax preparation software or hiring an accountant.

HOA Fees- If your house belongs to an association, you’ll also be responsible for HOA dues, which can range anywhere from $25 to $1,000 or more a month.

Landlord Insurance- Landlord insurance can cover certain costs, such as damage to the house or if someone is injured at the residence. You can expect this to cost roughly 25% more than the typical homeowner’s insurance policy.

Vacancies- Consider, too, the cost of vacancies between tenants. If a tenant moves out and you don’t have a replacement, that’s the income you’re losing out on.

Cost of Selling:

Home Improvements- To get your house in shape to sell, you’ll likely have a few costs to pay. These might include the cost to enhance the property’s curb appeal and make any necessary repairs. You may also be considering doing a home inspection, to find out what fixes you’ll need to make, which will be another expense to consider. 

Real Estate Commission- At up to 6% of your home’s sale price, the commission you pay to your listing agent could be your most significant expense when selling your Memphis home. To put that into perspective, if you sell your place for $250,000, you’re looking at paying $15,000 (6%) in commissions. 

Home Staging- While not necessary, staging your home can increase your home’s desirability to potential buyers and net you more as a result. Depending on your home’s size and other factors, staging can cost anywhere from $1,000 to $8,000 or more.

Utilities- You’ll still be responsible for paying your utility bills until the closing date.

Home Loan Payoff- Once you’ve sold the house, the proceeds will need to go towards the remainder of your mortgage. Click here to find out if you can sell your house before paying off the mortgage. 

Closing Fees- In some cases, you may be asked to take on some of the closing costs, such as prorated property taxes and attorney fees.

Things to Consider When Renting or Selling a House in Memphis

Besides the cost of renting vs. selling your home, there are other things you’ll need to consider. When selling your Memphis home figuring out a competitive price will be necessary. If you sell with an agent, they will usually give you some price comparables for the area and advise you what to list for. If you sell by owner, it will be up to you to figure out a reasonable listing price. 

Pricing too high may turn people away and cause the listing to go stale, leading you to reduce the price and sitting on the market longer. Pricing too low may cause you to leave money on the table or the condition of your listing to be in question as to why it’s priced so low. 

To get an accurate value of your home, consider hiring a home appraiser to evaluate the property. They will let you know what your home is worth in its current condition. With that information, you can determine a competitive price to list your home for in Memphis. 

Another thing to consider is capital gains. If you don’t know much about capital gains, you are not alone. Capital gains are taxes that you owe the government when you sell an asset such as a house for a profit. If you live in the residence for less than a year and sell for a profit, what you owe in capital gains will be a lot more expensive than if you sell after two years. To avoid paying that higher price, it may be a better idea to keep the house as a rental until you have owned the property for more than a year. 

house for sale in Memphis

Final Thoughts 

If you’re leaning towards renting your Memphis house, make sure you prepare yourself ahead of time. Remember to do everything legally and to be financially prepared if any unforeseen expenses arise.

If you’re leaning towards selling your house instead but are concerned about the cost of repairs to your home, that is understandable. It’s hard to justify putting more money into a place you’re about to turn around and sell. For others, they just don’t have the extra time or money and need to sell their house fast. If you can relate, you can always consider selling your house to a local home buyer. 

Fair Cash Deal is a local home buyer in the Memphis area that purchases houses in as-is condition. By selling as-is you won’t have to deal with the hassle or expense of home repairs which are ideal if you have a foundation problem, water damage, a leaky roof, or unfinished construction. 

They are also cash buyers, which means they can make you a cash offer for your home within 24-hours and close within 7 days. Since they have the cash on hand to buy your property, they don’t have to wait on financing, loan approval, or home inspections seen with traditional home sales.

Another bonus to working with Fair Cash Deal vs. listing with an agent or selling by owner is that they don’t charge real estate commissions or service fees; they will even help cover closing costs. That alone is a savings of several thousand dollars. 

So if you’re still on the fence about renting or selling your house, consider talking to Fair Cash Deal. Their home buying process is easy, and they are willing to work on your schedule, whether that be fast or slow. 

Fair Cash Deal is a BBB accredited business with an A+ rating and is a family-owned company. Find out more about their company by visiting their website or by speaking to one of their team members. They look forward to working with you!

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