In today’s market, renting investment property is one of the best options for long-term investments and maximizing your profit related to the subject. Alongside being a great value holder, it is certain that this type of investment is among the most secure ways to invest money. However, it is hard to determine whether to rent or sell your investment property is right at the given moment, which solely depends on the current situation, personal needs, and preferences. To help you decide should you rent or sell your investment property, check out the following text, where we’ll explore what would be the best option at the given moment.
Renting Your Investment Property
Is it possible to rent out your home or investment property? In theory, yes, but a couple of factors may influence this possibility; the most important one is whether or not you have a mortgage on your home. In that case, you may need permission from the lender. For instance, if you want to rent out your property for a certain time period before you move back in, your lender might agree and let you rent through your current mortgage deal, which is known as “consent to let“-it will usually allow you to rent that property for up to 12 months. On the other hand, if you plan to rent out the property for a longer period, your lender will probably ask you to move on to a buy-or-let mortgage with them or with a new lender.
Reasons For Renting Out Your Home
So, when should you consider renting out your home? There are many situations when renting out your home is a much better option than selling it. If you aren’t sure what are the main reasons and the best time for renting out your home, check out our list below.
- When you’re buying a new property by yourself or with your partner and want to keep the old property as an investment. In this case, we highly advise renting out your home as soon as possible.
- If you are moving out temporarily, especially for longer periods of time.
- You decided to sell your property, and it isn’t selling, or the offered price is too low for your standards, requiring a quick action in order to avoid losing value.
- You aren’t really sure if you’ll manage in the new environment and want to test yourself while keeping your old home in case things don’t go according to plan.
- If you want to find yourself in real estate, you can use your old home as your first rental property and build a property portfolio.
The Pros and Cons of Renting Your Investment Property
If you choose to rent out your property, this decision will provide you with a relatively steady income stream. By doing so, you will still own the property while benefiting from long-term capital growth. Besides, the mentioned rent will cover your mortgage while releasing you from that particular expense if any of the circumstances change, meaning you will still own the property you can live in again.
However, keeping and renting out your investment property will most certainly cause expenses regarding bringing your property up to rental compliances criteria. Besides, you may experience ( and most probably will) maintenance costs. Furthermore, if you own more than one property, you’ll have to pay stamp duty. Oh, and don’t forget about taxes since in case you plan on renting out your home, you’ll have to pay capital gains tax.
Selling Your Investment Property
Although we all know what selling means, you might not know the full definition of selling your investment property. If you choose to sell the property you held for a year or less, short-term capital gains happen. As for taxes, this means that selling the property is taxed as ordinary income. You will pay the same tax rate on short-term gains as you would on wages from the job you’re doing.
Reasons For Selling Your Investment Property
So, when should you consider selling your investment property? There are many situations when selling your investment property is a far better option than renting it. If you aren’t sure why it might be a good idea to sell your property, check out the following list below:
- If you are moving far away from the current location and want to cut all ties with the old place.
- Can’t afford your current property or home and want to buy another property or another home to live in.
- You want to release money tied up in the mentioned investment property.
- Maybe you don’t want to be a landlord.
- You’re experiencing some financial difficulties and need urgently to pay off your mortgage; the easiest way to do it is by selling your home or your investment property.
Pros and Cons of Selling Your Investment Property
There are pros and cons to deciding whether to rent or sell. To help you decide, we listed the most important pros and cons of selling your investment property.
By selling your investment property, you will release equity in order to buy your new home. You can avoid paying capital income tax, especially if your home is the main residence. Also, you won’t be responsible for more properties and you’ll make fast money and use it for long-term investment.
Selling at the given moment, especially the wrong one since the market is very unpredictable, could mean losing further growth of your home’s value. If your investment property is worth less than your mortgage, you’ll have to pay the difference to ensure paying off your loan. The most common con of selling your investment property is it can take a long time.
We hope our article helped in deciding whether to rent or sell your investment property. In any case, if you have no prior experience on the subject, we recommend hiring a professional real estate management company to help you out. Enjoy the help and benefits of an apartment management company. They will ensure everything goes in the best possible order.