Is It Better To Sell or Rent a House?

By
Services for Real Estate Pros with Common Ground Properties, LLC

Being a professional house buyer, I meet a lot of folks along the way who are trying to decide is it better to sell or rent a house? Of course the answer is it all depends. Here are some thoughts to consider.

  • Can you sell it right now? Most likely the answer is yes. In order to actually sell it, you may need to consider some alternative methods. Such as:
  • Regular Realtor Sale... you'll have to figure out what your home is worth. You can sometimes get an idea just by asking yourself "how much did my neighbours house sell for"... if it was a quick home sale (and you don't need to sell quick) you probably don't have to estimate that low. But realistically other people in your neighborhood that have had their property on the market may need a quick home sale which will affect how much you can sell yours for. Now you can call a realtor, but if you don't use a reputable realtor, often they will just tell you what you want to hear about sales price just to get the listing. Then once its been on the market and not many people have shown up, they'll start to break the news to you that you need to lower your price. So do your own research, get a general idea, then deduct 6% for realtor commission, 1% to 3% for closing costs and figure you'll pay some buyer closing costs to sell it (buyers are in the drivers seat these days).
  • A Short Sale – have the bank accept less than what you owe. Will that impact your credit, your future… yes, but we started this discussion by asking is it better to sell or rent a house…. So depending on how you sell, there could be some repercussions. And a short sale comes with a long list of negatives… but it is a way to get it sold.
  • Selling with owner financing. Which would allow someone to take over your payments. If you’re thinking about renting… then selling with owner financing should be a definitely consideration… Why? Well lets discuss some things to consider when renting.

Renting Pros

  • When you rent it out, you still get all the interest deductions of your income tax. You get to use depreciation to reduce more of your taxable income.
  • If you’re in an area where real estate has not been super over inflated and in an area that’s not been experiencing a high rate of foreclosure. Then you could experience appreciation and the home could be worth more in the next few years. As with everything in life, what goes down, must go up. Eventually the real estate market will come back.
  • Potentially passive income. We all dream about checks just arriving in our mail box without having to actually go out and work for the money. That is what rentals can do for you. Many people work 20 or 30 years to retire with a small pension. If in that same time period, you just bought 2 or 3 houses. Let the tenant pay them off over the next 30 years. You'd end up with 3 houses that sent you money each month and would be worth a lot more than you paid for them. If your mortgage is not too high, you could get a little money each through passive income.
  • Build up of equity through mortgage pay day. The longer you have a mortgage, the more each of your payments goes towards principal. So as the tenant pays you, more and more of your mortgage gets paid off and it builds up your equity.

Renting Cons:

  • Tenants, Toilets and late night calls. And if you’re here in the Austin area… negative cash flow. That’s where monthly its actually costs money to keep a renter in there…
  • When you’re considering renting, go online to craigslist, pull out a newspaper, call the for rent signs in your neighborhood. That will give you a good idea of what you can rent it for. Then you’ll need to calculate costs to pay a management company (typically 8% to 10% of the monthly rent) and some reserves for repairs. Because when their kid throws a toy into the toilet, or two entire rolls of toilet paper, they will call you and say “the toilet just stopped working, I have no idea what happened”
  • Then the costs of repairs after they move out, yuck… and if they left on not such good terms, you could be in for some major damage. You could get lucky and find a tenant who cares about a piece of property they don’t own. But its always better to budge for what’s coming.

If you’re not in a position to cover repairs, negative monthly cash flow and selling through the regular realtor process. Then definitely consider going the owner financing route. If you’ve got a home in the Austin area that you want to sell, need a quick home sale or need cash for houses and have thought about renting it to get a quick solution.... but don’t want to deal with the cons I’ve listed above, consider selling to us with owner financing. Leaving your mortgage in place. You’re payment will get covered 100%, you’ll have responsibility for repairs and you’ll end up with a family in the home that has an ownership interest in the home. When their kids draw with crayons on the wall, they’ll care. When their teenage parks on the grass, they’ll care. It will be their home and they’ll have a vested interest in making sure it stays nice. What does a renter have invested in your property? Maybe one months security deposit? There are pros and cons to each option. If I can lend my advice for your specific situation, please just ask. I’ll be happy to give my many years of experience of being a landlord (I used to own over 200 rental units) and at the same time I sell some of my properties outright and sell many with owner financing and have done so for many years. So my opinion is backed by lots and lots of experience. Some of it very painful. You can listen to the advice of your neighbor, your realtor friend and your family members. Just make sure to ask them what their advice is based on. How many properties have they rented? How many have they sold (of their own)? How many of their own have they sold with owner financing? Then call me and we'll brainstorm together on what could be the best solution!

Wishing you and your family all the best.

Austin Owner Financing Specialist


Austin’s Most Trusted Name In Owner Finance,
Let us prove it to you.

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