Sell Your House or Rent It?

Is it smarter to become a landlord than pay a big, fat capital gains tax? Here are the pros and cons of renting and selling your house.
Timeless Cape Cod Exterior

Timeless Cape Cod Exterior

By: Tammy Stoner

Before we spin the wheel of house selling, answer this one question: Have you lived in the house you intend to sell at least two of the past five years? If not, you might incur early mortgage payoff penalties and capital gains tax --- two very hefty bills that may make it financially unwise to sell your home. There are ways to avoid capital gains tax --- job change, divorce, death of a spouse, etc., so check with your accountant if you think you might be the exception to this firm rule.

If you have not lived in your home for two of the last five years, or you have the capital to finance another move without selling your home, or if the market is slow in your area, you might want to consider renting. When budgeting for a renter, be sure to include the following costs:

  • Mortgage payment
  • Property tax
  • Homeowner insurance
  • Homeowner association dues (if applicable)
  • Property management company (if applicable)
  • House maintenance

Also, check to be sure your property insurance premiums won’t change if you convert your residence into a rental property. Above all, prepare yourself mentally: Realize this house is no longer your home but your rental property.

Next Up

Renter or Seller: Timing Your Home Purchase

With a plan in place, suddenly buying a home feels a lot less stressful. Here are tips to ease the process.

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Play up your home's amenities for the season in which you choose to sell.

To Sell or Not to Sell

It may seem like a good idea to sell your house, but often renting is a more lucrative option. Read these tips before deciding to sell and choosing an agent.

Renting a Home in a Big City

Learn the extra costs and challenges that come with renting in a major metro area.

Renting a Home With Bad Credit

A less-than-stellar score doesn't have to derail your rental search.

Rent a Relocation Truck

See why DIY is the cheapest way to move.

Rent Out or Swap Your Unsold Home

If you're having trouble selling, try marketing it as a vacation destination.

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