When buying a home, we imagine that we will spend there the rest of our lives. However, there are many situations when it is better to pack your stuff, move out of your home, and start renting it out. What are these? Keep reading to figure it out:
Temporarily Relocating to Another City
Consider the following scenario. You’ve just been asked by your job to move to another city for a couple of years before returning to your current location. Obviously, you can’t keep living in your current home if your new location is a few hundred miles away. Moreover, it doesn’t really make sense to sell your home, buy another one in your new city, and then repeat the process a couple of years ago when you are back to your current location. It will be a total waste of time, money, and energy.
So, what is it best to do in this situation?
The answer is simple: You should lease your home to tenants and rent a house in your temporary location. The only issue to decide on is how much of your furniture you would like to take with you and how much you would like to keep for your tenants. That will help you set the rent you should charge for your home.
Moving for the Long Term
Relocating temporarily for work or other reasons is not the only case when you should move out of your home and lease it. Renting out your current home might be your best bet even when you are moving to a new location for the long run.
“Why?”, you might be wondering.
Imagine the following situation. At the moment you are living in a small town in California where property prices are low. Suddenly you get a job in San Francisco and decide to move there with your family. Even if you sell your home, the money will not suffice for as little as a minimum down payment on a property in the expensive San Francisco real estate market. The best thing you can do is to find out tenants to lease your home to and rent a house in San Francisco. Your rental income will make it a bit easier to pay your own rent.
So, when relocating to markets with such high price to rent ratio such as San Francisco, you don’t have to hurry to sell your home to buy a new one. You can just rent instead.
Being Located in a Buyer’s Market
It is never a good idea to sell your home in a buyer’s market unless you absolutely have to. A buyer’s market is a real estate market which is characterized by declining property prices, longer days on the market, and a growing inventory of properties and which, as the name suggests, favors property buyers rather than property sellers.
If, after analyzing your housing market, you realize that you are situated in a buyer’s one, it is better to wait for a few months or years until the situation flips. Real estate appreciation is a given, and sooner or later real estate prices will go up. Until this happens, you should keep your home and lease it to tenants.
Requiring a Different Type of Property
There are many situations in life when a person suddenly ends up with a new need for housing. This can refer to both upsizing (getting married, having kids, etc.) and downsizing (divorcing, kids moving out, etc.). You face two options: 1) To sell your home and buy a new one; or 2) To rent out your house and buy/rent another one.
As long as you can afford the latter, it’s always better to choose it. Property prices go up year after year, so the longer you hold on to your home before selling it, the more you will be able to sell it for. Moreover, all the time you will be receiving rental income which can go towards your rent or the monthly mortgage payments for your new home.
Not Being Able to Afford Your Home
When buying a home, a person should take into consideration all the various expenses associated with owning a property as well as his/her future financial situation. However, regardless of how careful you are in your planning, life can always take an unexpected turn for the worse. Maybe you lost your job… Maybe you got divorced and have to pay all bills on your own…
If you are currently living in a large luxurious property which you can no longer afford, you should consider the option of renting it out. Such a house will bring you a lot of rental income, which will be more than enough to pay your own rent or even mortgage payments if you decide to buy a smaller, more affordable house.
Making More Financial Sense
Things don’t have to go bad for you to discover that you are not in an ideal financial situation. Maybe you bought a house that’s too big and too luxurious for your own needs. Such a property might make a perfect rental as it will generate a lot of money for you, the landlord. Meanwhile, you can rent a smaller and less pretentious property which serves all your needs. Or perhaps you and your significant other are moving in together, and you both own your homes. Maybe your roommate is getting married and getting his own place with his spouse.
These are great reasons to move out and rent out your house. However, before you get into this endeavor, study the local housing market, do proper research and rental analysis, and make absolutely sure that you will be able to lease your home for more than what you will rent your new property for.
Buying a home is not the end of a journey. Life can take various turns which make it necessary – or at least smart – to rent out your home and move to a new one. Being a landlord – and a real estate investor in this way – is one of the best ways to make money. Rental properties let you make money in the short term through rental income. Moreover, they make you rich in the long run: Once you decide the time has come to sell your property, you will get a higher price than what you initially paid for it due to real estate appreciation.
Check out our infographic on this topic here.
Daniela Andreevska is Content Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that’s usually 3 months now can take 15 minutes. We provide all the real estate information in easy to understand visualizations.