Is it better to sell your home now or turn it into a rental? Many homeowners struggle with this choice, especially in a market where U.S. home prices rose 6.4% year-over-year in early 2024, according to CNN.
That growth makes selling tempting, but renting could bring long-term income. The right decision depends on your goals, finances, and local market. Today, we’re taking a closer look at the pros and cons of selling a house vs renting, including how trends, expenses, and taxes should factor into your decision.
Understanding Property Market Trends
If homes in your neighborhood are selling fast and for high prices, it might be a good time to sell. A hot market can help you get a strong offer without waiting too long. On the other hand, if sales are slow or prices are falling, you might want to hold off or consider renting.
Look into what similar homes are renting for in your area. If rental demand is high, you could have a steady stream of income.
This is especially true in cities with limited housing or high job growth. If there are many empty rentals nearby, it may be harder to find good tenants or charge what you want.
Mortgage rates and available listings can shift quickly. Higher rates often mean fewer buyers, which can push home values down.
A large number of listings could make it harder to sell at a high price. Paying attention to these trends can help you decide if it’s smarter to hold on or sell now.
Tax Implications of Selling vs. Renting
Taxes can play a big part in deciding whether to sell your home or keep it as a rental. There are three main tax areas to consider when comparing selling and renting:
- Capital gains taxes when you sell your home
- Tax breaks available to rental property owners
- How long-term decisions affect future taxes
Capital Gains Taxes When You Sell Your Home
If you’ve lived in the house for at least two of the last five years, you may be able to exclude a good portion of your profit from taxes.
But if the home has been a rental, or if you haven’t lived in it for a while, you could owe capital gains tax on the entire profit. That number can be large, depending on how much the home has appreciated.
Real Estate Investment: Tax Breaks Available to Rental Property Owners
Rental owners can deduct many costs, including:
- Repairs
- Mortgage interest
- Property taxes
- Depreciation
These deductions can lower your tax bill each year and help make renting more attractive. If you track your expenses and file carefully, you might save more than you expect.
How Long-Term Decisions Affect Future Taxes
Selling now might keep things simple. Keeping the property and turning it into a rental means your taxes could grow more complex.
Over time, if the property continues to gain value, the tax bill when you finally sell could be higher. Some owners wait too long and get caught by surprise.
Long-Term Value: Appreciation vs. Cash Flow
Some people sell a home to get a quick return. Others keep the property and earn income each month. There are three ways long-term value plays a role in your decision:
- Selling gives you a one-time return through appreciation
- Renting creates steady cash flow over time
- Both options are shaped by market shifts and inflation
Selling Gives You a One-Time Return Through Appreciation
If your home has gained value since you bought it, selling could leave you with a large payout. This is helpful if you’re moving, downsizing, or investing in something else. You walk away with the equity and don’t have to worry about repairs, tenants, or market dips in the future.
Renting Creates Steady Cash Flow Over Time
Keeping the property as a rental may not give you a lump sum, but it can bring in monthly income. This can be helpful in retirement or as a way to build wealth slowly. If your rent covers expenses and leaves room for profit, this option might be worth more in the long run.
Both Options Are Shaped by Market Shifts and Inflation
Home prices and rental rates don’t move at the same pace everywhere. A home that rises in value now might slow later. Rents might grow or stay flat.
The long-term value depends on:
- Where the market goes
- How much upkeep your property needs
- How patient you can afford to be
Selling a House vs Renting: Which Makes More Sense?
When you weigh the pros and cons of selling a house vs renting, the answer often depends on your personal situation. There’s no single option that fits everyone. Some homeowners are looking for a clean break and a fast payout.
Others are thinking long-term and want steady income. You have to look at your own goals, your property, and your local market to make the best choice.
If your home is in demand and prices are high, this might be the right time to sell. You can walk away with a strong return and avoid future upkeep.
This path often works best for people who are moving far away or downsizing. It can also help you liquidate real estate assets quickly, especially if you need the funds for something else.
If rents in your area are climbing and you can find reliable tenants, renting could give you a long-term source of income. You’ll keep the property, gain equity, and collect monthly payments. This can work well for people who aren’t in a rush to sell and want to stay in the real estate market.
When To Sell Your Home
Deciding between selling a house vs renting isn’t always easy. Each path offers different benefits and risks.
At Next Level Property Management, only licensed experts manage your property. We list on major rental platforms at no cost to you, except for optional photo fees.
We combine top market tools and experience to price your property right. Our screening process is detailed, and our financial software offers full transparency for owners and tenants.
Get in touch today to find out how we can help with your property management.