If you and your spouse purchased a small home in need of extensive repairs as a "starter home" to get a toe in your local real estate market, you may be stepping back in satisfaction as all of your largest renovation projects have finally been completed. The curb appeal of a newly renovated home can help it pop on both the sale and rental markets — however, the decision whether to list your home for rent or sale (or even rent-to-own) if you're ready to upgrade can be a tough one. Read on for some of the factors you'll want to consider when making this important decision.
What are your moving plans?
In some cases, you'll need to sell your starter home in order to get the cash down payment you'll need for your next home — especially if you're in a competitive or high-priced market or are looking to dramatically increase either the size of your home or the desirability of your neighborhood. This is especially true if you carry a mortgage on this home, as supporting two mortgages on one (or two) incomes can often be a challenge when up against maximum debt-to-income thresholds.
In other situations, sale may not be necessary for you to move to your next home. If you're able to secure a low-down-payment mortgage on your next home, don't have a mortgage on your current home, or have your eye on another fixer-upper rather than a move-in-ready home, you may be able to keep your starter home and put it into rental service to provide you with a steady stream of income as you get to keep the underlying asset.
What is the rental market like in your community?
Even if you can financially swing renting your home out rather than selling it, if the rental market in your community is not a strong one, you may find that your former home spends more time sitting vacant than it does with occupants, and this type of infrequent use can often lead to problems. Miscreants in the neighborhood, aware the home is vacant, may see it as a target for burglaries or vandalism, while you may grow tired of mowing the lawn (or paying for these services) after you've gained the responsibility of another primary residence.
However, cities and towns with a strong rental market — or those in communities where your home is likely to be the nicest rental in the area — can make renting a much better option. If you're more than able to swing payment of your property taxes and other home expenses on the amount you receive in rent, you may even want to consider hiring a property manager who can help absorb much of the work of renting out your starter home. The property manager can be paid through a portion of the rent collected, costing you nothing out of pocket. For more information, contact local professionals like Foreside Real Estate Management.