Current homeowners may consider renting out their existing (or previous) home when they shop for a new house. Many people often think that as long as the expected rental income is more than the mortgage payment, then they’ll be profitable.
This is a common mistake because this doesn’t factor inoperating expenses rental properties incur, such as vacancies, reserves for maintenance, increased property taxes (since the home will no longer be eligible for a homestead exemption), and more. When these expenses are factored in, the homeowner might realize that the house doesn’t actually cash flow as a rental property. Or if it does cash flow, the profit margin may be less than optimal, and that it might make more sense to the sell the property and use the proceeds to either invest in a different property with better cash flow and profit margin, or a different asset class altogether.
If you’re a homeowner and unsure on whether it makes sense to sell or rent out your home, shoot us a message! We can help run the analysis to help you make an informed decision.