Keeping a house and renting it out comes with additional risks.

Should you sell your home, or should you rent it out instead? Stay tuned. This is a very popular question, so let's talk about some of the pros and cons of both decisions.

If you sell now, there’s no more future risk for you as prices continue to go down. Rates are on their way up, and two-quarters of negative GDP means we’re officially in a recession, so there's a lot of uncertainty in our market right now. Holding onto the home and turning it into a rental property does carry some risks. However, if you were to sell the home now, that risk is off the table.

If you lived in your home for two of the last five years, there could be tax benefits to selling the home now versus holding it into the future. I suggest talking with your CPA about selling your primary residence and what tax advantages you have now that you might not have in the future if you choose to rent the home out.

“Do you really want to be a landlord for 15 years?”

Now, let's talk about renting. Yes, you can collect rents while they’re high, and there could be some tax advantages for you. That being said, you do carry more risk. Prices could continue to go down, you could get a bad tenant who doesn't take care of the property, and because many sellers are turning homes into rentals, the market may become oversaturated and unprofitable.

People in 2005 and 2006 who didn't get the price they wanted and chose to rent their homes to wait for the market to come back were very disappointed. Prices continued to decline for four years before they hit bottom, and it took another 10 years to get that money back.

The owner of a property I just listed bought the home from the previous landlord. That landlord had bought the property in 2005 for $235,000 and sold it for $285,000 in 2020. They only made a $50,000 profit on the sale of their home over 15 years. Do you really want to be a landlord for 15 years? If you're going to keep your house as a rental property, I would strongly advise talking with your CPA and financial adviser first to see if it's in your best interest.

If you have any questions, give me a call at (602) 738-9943 or send me an email at jason@thepenroseteam.com. I look forward to hearing from you.