Should You Rent or Sell Your House?

If you have purchased a second home you no longer wish to use, you may opt to either rent or sell the house for a profit. This is a particularly difficult dilemma in an economic downturn. In these situations, many owners of secondary properties can no longer afford to pay a second mortgage, but selling the home could net a loss. Consider these factors when making your decision to rent or sell.

Do You Want to Be a Landlord?

Renting out a property is not just about collecting a check each month. You have to be prepared to manage the property or pay a management company for the service. This includes listing the property for rent, accepting applications, writing contracts and assuring all checks are deposited. You will also have to maintain the property. This means handling issues such as cleaning, damage and even routine repairs, perhaps remotely. Property management companies can be used in nearly every city or town, but the cost of hiring a third party will cut into your profits.

Is the Property Rentable?

Not all properties will yield a rent high enough to cover mortgage and expenses. For example, if you own a home in a remote mountain community, you may find it goes unrented the majority of the year. In contrast, an apartment in a metropolitan area may be highly desirable. Even if your rental is desirable, keep in mind it must meet all legal standards to be a rentable property. Your homeowner's association may forbid rentals and subleases. The property may also be zoned in a way that precludes renters. These issues must be handled before any action can be considered.

What Are the Financial Costs to Rent?

Expenses associated with a rental property can be very high on an annual basis. Luckily, these expenses are tax deductible if you earn an income on the property. However, you will still need the cash to make repairs, pay taxes and maintain insurance on the property. Factor in these costs when you consider what it will truly mean to keep ownership of the property. You may find that, even if the home is rented 80 percent of the year, the cost is still too high to make this option viable.

What Are the Financial Costs to Sell?

Ultimately, all second properties are an investment and should be treated as one. This means making a true comparison between the cost to maintain the property as a rental and the cost simply to sell the home at a loss. You may find the costs are nearly equal, and selling the property is typically the easier option. You may be lucky enough to learn you can sell or rent for a profit. In this case, compare the two profits to determine which will be the better financial decision. Always factor in the need to continually assure the property is rented when comparing costs. Individuals who simply assume 100 percent capacity on a property may be sorely disappointed.