Rent Versus Sell

Rent or Sell? How Do You Decide

You may be thinking that renting your home just isn’t right for you. That you don’t want the hassle of being a landlord. Or that if you rent, you’ll miss out on gains from sale.

But it might not be a cut-and-dry question.

Rent versus Sell is a critical question for every potential landlord to consider, and we have a few guiding principles to help you on your way.

Rent or Sell? How Do You Decide

The Guiding Principles of Rent Versus Sell

What’s your true profit at sale? Make sure you’re including all the possible costs:

  1. Sale Expenses Devour Profits. From Realtor commissions that STILL average 6% – even with all the technologies that should drive the cost down; to doc stamps, title insurance, escrow-agent fees, and required repairs, most research indicates that closing costs will take up to 9% of your contractual sale price. Now reduce that by the repairs that most buyers will demand and you could be looking at much less cash at closing than you anticipated.
  2. A Buyer’s Market. For Sale inventory may be low, but a home-buyer still has lots of negotiating leverage. You could end up getting much less for you home that you first expected if you Buyer is a good negotiator or if they have a reasonable number of alternatives to your property.

You’ve already paid the closing costs. You’ve already paid off some of your mortgage. Your monthly expenses are a known quantity. So before you sell off your home, calculate its financial performance if you made it into an investment today!

  1. Cash Flow as a Rental is a factor of your home’s net profit (profit after expenses).
  2. Actual Cash Invested is a simple determination of how much cash you already have in your home.
  3. Cash-on-Cash Return is calculated by dividing Cash flow by Cash Invested.

The rate of return on your cash is a critical indicator of the quality of your investment and if you’re considering alternative investments for your real estate dollars, make sure your alternative performs as well as your home will!

The historic annual appreciation rate for real estate in central Florida is 4%. That means your home’s value will increase by almost 50% if you hold it for 10 more years.

As you determine your Rent Versus Sale strategy, don’t forget to include this vital statistic. Even when we include periods of market instability, housing appreciation is a relatively safe bet.