Have you ever thought whether it would be better to rent or sell a vacant home that you own? Maybe you already have someone renting this house, or you have been considering renting it to tenants, but would that really be the better choice?
Deciding whether or not to sell or rent your vacant home is an incredibly big decision that requires a lot of thought. Therefore, you should always look at the pros and cons of selling or renting your home.
The Main Reason to Sell Your Home
Before you can look at the pros and cons of selling your home instead of renting it, it's important to look at the main reason why you should sell your vacant home.
If the following reason applies to you, then it is best to sell your vacant home as soon as possible.
The Value of the Neighborhood Has Gone Downstream
If your vacant home is in a neighborhood where the value is sinking, it's best to sell this house and move on as fast as possible. By doing so as quickly as you can, you will get more money than you normally would unless you plan on waiting to see if the value will go back up, which is an extremely bad idea.
Once the plummet in value has begun, it's hard to know when it will stop, or if it will stop at all. Speaking to a real estate agent who has experience and knowledge about dropping neighborhood value will help you in figuring out what to do.
If the agent believes that the value is not going to go up anytime soon, or at all, it's best to sell your vacant home as soon as you can. By using a real estate agent to sell your vacant home, the process will go a lot more smoothly when compared to doing it by yourself, especially if you need to sell it within a short period of time.
An agent will help you and tell you what to do when it comes to preparing the home, like referring you to a plumber or an electrician to have them come in and do a walk-through to ensure everything is in order. They will also give you advice whether or not you should stage the home, or just leave it empty of furniture, if you currently do not have any in there. Your real estate agent will also guide you through the selling price, meeting with potential buyers, going through the negotiation process, and finalizing the sale.
However, if you would like them to handle the meeting with buyers, negotiations, and closing the deal, you can sit out of these parts completely.
Although, if you are still unsure whether or not you want to sell or rent your vacant home, or you're willing to take the chance in a neighborhood that is losing some of its value, then the pros and cons below will help you to decide on your final decision.
The Pros and Cons of Renting Your Vacant Home
As previously stated, if you are still looking to rent your vacant home out to tenants, then the following pros and cons will aid you in your decision.
The Pros of Renting Out
The biggest pro when it comes to renting out your vacant home is that you'll have a second source of income.
This extra money each month will help you pay for the property taxes, mortgage, and utilities unless you are going to have the tenants paying for utilities each month, which is completely your choice.
You can increase the value in your vacant home by having some renovations done for your future tenants, which could end up becoming a future investment if you play your cards right.
For example, finishing the basement and adding a kitchen and a bathroom, if there is not a bathroom in there already. This will turn it into a basement apartment, and increase the home's value for resale.
By renting out your vacant home, you will successfully avoid squatters, vandals, and thieves. For example, if you own a vacant home and you are barely there, squatters and vandals are going to take notice. Don't be surprised if one day you show up to the house, especially if you are not there for weeks or months at a time, and find a squatter. Therefore, it's best to rent it out, so there is someone living there if you are not planning on selling it.
You may get lucky and even have a tenant, or tenants, who can help you with maintaining your property when you are unable to. This could be anything from lawn care to plumbing issues.
If you get lucky, a tenant could even become a future buyer for your property. However, this does not tend to happen very much, because people who are renting are generally not going to buy. Although, even if people have the money to do it, they may choose to rent for longer than they need to, to ensure that they have their ideal savings built up.
The Cons of Renting Out
Unfortunately, there are a lot more cons when it comes to renting out your vacant home than there are pros. For example, you could end up with horrible tenants who do not show their true colors until a rental agreement or contract has already been signed.
The process of evicting a tenant is a long one, and you must bring sufficient grounds to do so to the right place. In short, it can take months.
Bad tenants are considered tenants who cause damage to your property, are always late on rent payments, or don't pay rent period. This will cause you additional expenses for any repairs that need to be done, and will eliminate all of the benefits of renting out your property to begin with.
You could always have background checks conducted on each potential tenant, but sometimes this will not show you all you need to know until it's already too late. Another con would be tenants making the home difficult to sell. For example, say you have let your tenant know that you are planning to sell, and that they have to relocate within two months’ time. If they do not have options, they will try to make it as difficult as possible to sell the home.
Whereas if your home were empty, you could easily clean up, get the property ready for the potential buyers, and make any necessary repairs without having to work around your tenant's schedule.
The Pros and Cons of Selling Your Vacant Home
Deciding whether or not to sell your vacant home definitely takes a lot more thought than renting, the process is longer, but do you feel it will be worth it? After going over the following pros and cons of selling your vacant home, the decision will be much easier to make.
The Pros of Selling
One of the biggest benefits of selling instead of renting is, you guessed it, the money. Even though you would be getting income each month from your tenants, whether it's for rent solely or both rent and utilities, you will also have to spend on repairs, new appliances if anything breaks and anything else that goes wrong.
This can get incredibly costly, and there's no real way to plan your budget when you do not know what could happen.
Another large pro is freeing up equity and rolling over so you can apply such funds to your next home, or put all of that money away into your savings. Should your neighborhood drop in value, selling quickly will ensure that you get a fair chunk of cash before the value falls.
If your home qualifies, you can even get a capital gain that is tax-free, where you would not if you decided to rent the home out. Utilities can be quite expensive, especially if you are not charging your tenants for them, and they receive sky-high utility bills.
Tenants can be difficult to deal with, especially if you come around saying that they need to use less water and stop keeping all of the lights on.
It could also start an issue if you, for whatever reason, have to add utilities to their rent, and they make a scene about it. By selling your vacant home, you won't have to deal with tenants or utilities, period!
You will no longer have to worry about squatters, or tenants completely wrecking the place and making the value of the home plummet to the point where you're spending thousands of dollars trying to fix it and make it a home again. Plus, you will save hundreds of dollars per year when it comes to maintenance that you will no longer have to do anymore, which will also help to give you a peace of mind.
If you have already bought another home, you will no longer have to worry about keeping up with two mortgages, which will save you time, money, and a ton of stress. Why yank your hair out over both homes, when you can just sell your vacant one? The answer is simple; just sell it and move on.
The Cons of Selling
The only major con when it comes to selling your vacant home is that it could be difficult for you emotionally, if you have memories ties to the home. Perhaps you bought a new home and are keeping your old one for whatever personal reasons you may have.
Another con is the process of selling, but that can be easily be dealt with by taking on an experienced, reputable real estate agent who knows how to sell homes quickly, especially in a declining value neighborhood.
Though the process may take some extra time, and it can be very stressful, the real estate agent can help you get your home appraised for a selling price, do all of the showings with potential buyers, work with buyers during the negotiation process, and even finalize and close the deal for you once all of the proper documents have been signed.
Making the Best Decision
Based on the pros and cons listed for you, the decision to either rent your house out to tenants or sell it should be an easy one. By selling, you won't have to worry about risky tenants, keeping up with constant maintenance, squatters invading, vandals destroying the place, and you will not have to pay utilities or a second mortgage anymore, if applicable.
If you choose to sell the house, you will surely have a great deal of weight lifted off your shoulders. Sure, the process of finding a buyer and closing the deal will be long and somewhat stressful, but things will be much easier once you do.
However, if you do decide to rent out your vacant home to tenants, just be sure that you know what you're doing, you are careful with who you choose to rent the home out to, and always stay on top of maintenance and repairs.
You will probably have to spend more money than you will receive for rent and utilities, if you choose to not to charge for them, but it may work out for you in the end. Once you make a final decision, it's best to get on it immediately. Whether that decision is renting your home, or contacting a real estate agent to help sell the house as quickly as possible.