To Sell or Not to Sell: Should You Keep Your Current Home as a Rental?
By James Riel, Principal Broker-Owner, JR Associates
If you refinanced your home between 2019 and 2022 when mortgage rates were at historic lows (think 2-4%), you might be facing a dilemma as you consider upgrading to a new property. The current housing market presents a unique challenge for homeowners like you—wanting to upgrade, but not wanting to lose out on those incredibly low interest rates. The solution? Renting out your current home while still upgrading. It’s a strategy that more homeowners are turning to as they look to take advantage of today’s market without giving up the financial benefits of their existing property.
Why Some Homeowners Feel the Urge to Sell
Many homeowners find themselves in a position where selling their current home is the quickest way to free up the cash needed for a down payment on their next place. After all, who wants to deal with the hassle of managing two properties when you could just cash out and move on?
But here’s the thing: selling your current home might not be the financial slam dunk you think it is—especially if you’re sitting on a mortgage with an interest rate that’s the envy of many in today’s market.
Why Renting Could Be the Smarter Move
Here’s where the plot thickens: if you’re looking to upgrade but don’t want to give up your low-interest mortgage, consider renting out your current home instead of selling it. Renting out your home could potentially generate passive income (hello, extra cash flow!) and allow you to buy the home of your dreams without giving up the financial perks of your current property.
Now, you might be thinking, “But James, I don’t want to become a landlord!” Fair enough—nobody’s saying you need to start wearing a property management hat, but hear me out. Many homeowners are shocked when they do the math and realize they can rent out their current property for more than their mortgage payment. That’s exactly what happened with one of my recent clients.
They were originally planning to sell, but after consulting with their lender and crunching the numbers, they realized they could keep their home, rent it out for a healthy profit of $1,000+ per month, and still buy a new place. I mean, who wouldn’t want to be a landlord if you’re essentially getting paid to own property?
The Benefits of Becoming a Landlord (Even if You’re Not One for “Landlording”)
Okay, let’s address the elephant in the room: the idea of becoming a landlord might seem like an extra headache. But before you roll your eyes, let’s take a moment to consider the financial benefits:
1. Passive Income
It’s called passive income for a reason! If you rent out your home, you’re likely to start generating income each month. If your rent covers the mortgage and then some, that’s money you can use for your next property—or better yet, sit back and enjoy.
2. Property Appreciation
The beauty of holding onto your property is that it’s likely to increase in value over time. If you keep it as a rental, you could benefit from both cash flow and capital appreciation. So not only are you earning from your property, but the value of it could go up over the years. Win-win!
3. Tax Benefits
Did you know you might be able to deduct certain costs associated with owning a rental property? From property maintenance to mortgage interest, there are tax advantages that could make your rental property more lucrative than you initially thought.
4. Flexibility
Let’s face it: life is unpredictable. Holding onto your property gives you the flexibility to decide what to do later—whether it’s selling when the market’s in your favor or simply letting it earn you income for years to come. You’re in the driver’s seat here.
Can You Make It Work? The Financial Side of Things
So, how do you know if keeping your home as a rental will actually work? Well, first, you need to talk to a lender. You’ll need to explore your options, understand the rental income you’ll be generating, and determine if you can still qualify for the next mortgage.
I know, it sounds like a lot of work, but here’s the good news: you don’t have to go it alone. With the right guidance from your lender and your real estate advisor (that’s me!), you can make an informed decision.
Final Thoughts: Make the Smart Move
At the end of the day, the decision to sell or rent your home isn’t something to take lightly, but it’s important to weigh your options carefully. Keeping your current home as a rental could not only preserve your low mortgage rate, but it could also open the door to additional income and long-term wealth.
Not everyone wants to be a landlord, but for many, the benefits of retaining a property far outweigh the potential headaches. If you’re considering whether to sell or rent, let’s chat. I can help you evaluate your options, crunch the numbers, and make the best decision for your financial future.
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