When you have a vacant property, you’re left with an important decision— rent it or sell it? Both, of course, come with several pros and cons. However, in the ever-changing market, leasing a property usually pulls out on top as a clear winner. If you’re thinking of getting started as a landlord, here’s a closer look at the pros and cons of renting versus selling and how to determine which choice is best for you.
Pros and Cons of Selling
Selling a property means you get the home out of your hair. No more paying taxes on it and no more performing any maintenance. It also comes with the advantage of acquiring a lump sum of cash at one time. If you owe money on the property, you can pay it off. If you have other debts, you can use any money left over to pay them down, as well.
On the other hand, if you are selling a home, you’ll have to pay taxes on your capital gains. However, if you have lived in the house for at least two out of the past five years, you may be able to enjoy tax breaks on any capital gains. For married couples who have resided in the home for two of the last five years, you won’t have to pay taxes on any capital gains up to $500,000. If you’re single, this tax break has a limit of $250,000 in capital gains.
You also should consider whether you can sell the home at a profit. If you can’t, then any loss won’t be viewed as a loss for tax purposes. This means your loss is a total loss without a chance of being able to recoup any portion of the money that you lost on the investment.
Pros and Cons of Renting
Renting a home comes with advantages and disadvantages, as well. However, property owners often go the rental route because of the pros that it offers. For starters, the money you invest in the property to rent it will likely be tax deductible. Any repairs you spend money on qualify for this tax break, too.
Many landlords reap such huge deductions for repairs and maintenance that they end up eliminating all taxes due on the income they garner from renting the properties. The money they make is pure profit, without a need to pay taxes on them. You’ll also be able to deduct property taxes along with mortgage interest payments. Other deductions to be enjoyed include money spent on advertising and broker’s fees.
The cons of renting include having to go through the process of marketing the property and screening the tenants. If you don’t have time to devote to marketing the home on a regular basis, you will likely endure extended vacancy cycles, which can quickly cost you a significant amount of out-of-pocket money. The longer the property goes unrented, the less income you are generating off of it.
Screening potential tenants can be a headache. It includes doing background checks, verifying employment, checking references, and much more. These processes are another aspect of renting that can quickly convince an owner to sell rather than turning the property into a rental.
Should You Hire a Property Management Company?
Renting out property has the potential to earn you more money than selling it. Think about it. If you sell a paid-off home and make a profit of $50,000, you’re doing pretty good. If you rent that property, however, for $800 a month for 15 years, you have made a profit of $144,000.
If you’re wanting to rent a property but don’t have time to market it, screen tenants, and perform maintenance, you can always take advantage of hiring a property management company.
A reputable property management company understands the complexities behind renting a home. They employ a team of professionals that handle all aspects of renting your property, allowing you to sit back and relax as you enjoy the profits.
Property management companies stay up to date on the latest marketing methods that will render you the highest profit potentials. They perform valuable research to ensure you are earning top-dollar on your rentals. Even better, they understand how to target audiences who pay top dollar.
Are You Ready to Rent Your Property?
Now that you see it’s better to rent your property than to sell it, consider teaming up with an experienced property management company. If you decide later on down the road to sell the rental, the property management company can guide you in the right direction to ensure you partner with an agency that can market and sell it in a fast and efficient manner.
Contact us today for a free consultation to learn more about the benefits of teaming up with a Dallas property management company. You can also download our free “Guide to Finding the Best Dallas Property Management Company” for helpful information you can use to interview property managers in your area.