Whether you have to move to keep your job or you just want to relocate for personal reasons, you still are stuck with a dilemma about what to do with your house -- rent it out or sell it. Depending on how long you have before you move, what the housing market is doing in your area, and who you can trust to manage your property, you have a number of decisions to make.
Mostly Money Matters
Much of your decision lies in which path is going to be more profitable for you. If you have a lot of equity in the house and can sell it, you’ll walk away with some cash in your pocket to help you purchase a new home. If the house is paid off, you'll walk away with even more cash. At the same time, if your equity is built up and you have low mortgage payments, you can bring in a substantial monthly income by renting the house for more than your mortgage payment. Again, the profit will be even greater if the house is paid off and there are no mortgage payments. However, you also have to think of other costs associated with renting the house out. Since you are relocating to another town, you'll probably have to hire a property manager to collect rent and take care of issues that come up. You might also have to pay for advertising to rent the home.
Relative Risks Involved
There’s some risk involved no matter which way you go. If you put the house up for sale, you run the risk of not selling it quickly, leaving you with two mortgage payments or a house payment and rent on a new place. The bigger risk may lie in renting, however. There’s the chance you’ll rent it out to folks you believe will be good tenants but wind up paying the rent late or not at all. There's also the risk that renters will leave your house in disrepair and lower its value.
Markets May Fluctuate
Housing markets can fluctuate drastically from year to year. You have to take into consideration what kind of shape your neighborhood is in to support a quick sale. If other homes have not been selling, for example, you might not get as much for your house as you might if you could wait a year or two while you rent it in the meantime. On the other hand, it the housing market is hot in your neck of the woods, it might just be the best time to take advantage of it and sell it to wring the most value out of it.
Moving Into New House
Finally, you’ve got to consider whether you can even get a new mortgage while you still own the first house. According to Kiplinger, lenders count about 75 percent of the income you receive from renters when figuring out if they’ll give you a new loan, but that’s only if you have a signed lease and your new salary is sufficient to cover the rest of the mortgage requirement. If you sell your old house, however, it’s going to be much easier to qualify for a loan on a new place.
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- The Advantages of Selling a Home at a Loss
- Can You Rent Out Your Old House and Get Another Mortgage to Buy a New House?