Should You Sell or Rent Out Your Home – 9 Considerations for Homeowners

You’ve decided to move. Your next thought might be: “Is it smarter to sell or rent out my home?” Owning a rental property can prove to be a savvy financial move. Who doesn’t want a steady source of income while building equity in an appreciating property? But before you decide you want to be a landlord, here are some questions to ask yourself (and discuss with your financial advisor)

Top 9 things to consider before renting out your home

1. Do you need the equity for a down payment or to pay for the new home?

If you need the money for a new home, your decision is easy: Sell. In other words, if you don’t have resources outside of the home equity to purchase the new home, you may not have the option to convert it to a rental property. While a home equity loan or line-of-credit may be an option, you need to consider your overall debt levels.

2. Do you have a positive cash flow?

While rental income may sound great, it’s easy to forget there’s no guarantee that you’ll receive it every month. You’ll need other income sources, or a cash reserve, to cover costs during vacant months, or if the tenant pays late – or not at all, and you have to initiate eviction proceedings.

3. Is there strong demand for rentals in the area?

At a minimum, you’ll need to charge enough rent to pay your monthly expenses. If demand is strong, you’ll stand a better chance of keeping your home consistently rented. Check with local rental professionals or a website like to research the current rental market.

4. How will you manage the property?

If you’re relocating out of the area, you may need assistance with managing the property. Your options range from hiring a service provider on an as-needed basis to paying a percentage of the rental revenues with a property manager. If you plan on self-managing, consider the stress, time and resources required. For example, if the tenant leaves the home in disarray, are you prepared to serve as the general contractor?

5. Is future appreciation likely?

No one has a crystal ball, but home prices usually go through distinct cycles. Is your home in an area with depressed prices, or are prices at all-time highs? If the prices are low, that may be an argument for renting it out until prices recover.

6. Are you prepared to take on the liability?

As a landlord, you also have additional potential liability to be concerned with. For example, if someone gets hurt in your rental, you may be held liable. To limit your financial exposure, you’ll want to switch from a regular homeowner’s policy to a landlord policy and likely increase your umbrella policy. You’ll also need to learn and abide by the Fair Housing Rules and all state/local regulations. Contact your property and casualty agent and attorney for guidance. Your financial advisor may be able to recommend someone.

7. How will this impact your income tax situation?

With changing tax laws, you need to find out how the rental income, and offsetting expenses and depreciation, will impact your bottom line. Check with your accountant. Your financial advisor may also be able to help with this.

8. Will you lose your ability to sell the home without paying taxes?

If your home has appreciated in value, the Home Sale Tax Exclusion can allow you to avoid capital gains. However, to maintain the exemption, you’ll need to limit how long you rent it out, or you may need to return to live in it for a period of time to re-qualify.

9. Can the sale proceeds help with retirement savings and diversification?

Per a recent CNBC article, most Americans haven’t saved enough for retirement. If you own other real estate, reinvesting the equity into a diversified portfolio may help you balance your investments. This is something you should definitely talk with a financial advisor about, as an advisor should be aware of your comprehensive financial situation.

As you can see, this is a big decision that has many points to consider. A financial planner can help you understand the pros and cons based on your unique situation so you can make an informed decision.

Co-authored by Gary Williams, CFP®, CRPC®, AIF® and Nicholas Ibello, CFP®, AIF®

Gary Williams, CFP®, CRPC®, AIF® and Nicholas Ibello, CFP®, AIF® are Wealth Managers with Williams Asset Management. Williams Asset Management is located at 8850 Columbia 100 Parkway, Suite 204, Columbia, MD 21045. They offer advisory services as Investment Adviser Representatives of Commonwealth Financial Network®, a Registered Investment Adviser. Fixed insurance products and services offered by Williams Asset Management. For additional information about the services of Williams Asset Management, please call (410) 740-0220 or email at © Williams Asset Management. For more information about Williams Asset Management, please visit

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