Should I Sell My Home Or Rent It Out

Should I sell my home or rent it out? That is always a big question for people, especially in this environment, because if you sell your home, you're going to move into a new home potentially, or even if you're building or renovating, you got an interest rate issue that you didn't have probably when you bought your original home. So let's talk through the pros and cons. So what variables do you need to look at to decide are you going to sell it or are you going to rent it? Number two, we're going to talk about the tax implications on both. And then number three, the do's and don'ts of this decision. So first of all, if you're in your home and it is paid off already, then you don't even pay any interest. If your home is mostly paid and you have one of those original loans back in the day where you had two, 3% during COVID, they were often zero and 1% loans. So if you're in that low interest category, it is my thinking, why pay off cheaper money? And it is a massive topic and that's very controversial because there's many of you and many what I call just very different kind of money experts. Remember, I teach millionaire maker strategies, not Susie Orman, Dave Ramsey, just, you know, keep a job and don't grow and just have a 401k. And what they teach is great for many, many people, but it's not the same strategy. So you got to pick a path. You can't live in both strategies. They don't work. There's no collective combination of these teaching you to live corporate life, be an entrepreneur. So when it comes to your home, your home is a great asset, but if you have really, really cheap interests, why pay it off when you are becoming a good entrepreneur and a wealth builder in the millionaire maker plans? So your goal is to start learning to invest where you can get 10, 12, 15, 18, 20% returns on different investing strategies and different compounding powers of what you're going to decide. So in this model, why would you pay it off? Now, later in life, again, different decisions for those who want to pay it off later, but we're talking about, do you sell it or do you rent it when you're in those situations, say moving across the country? So let's look at when it makes sense to rent. So when renting makes sense, here's a few things that I want to provide in detail. When you are in a strong rental market with rising rents, there are markets that are actually rollercoastering right now, used to be really good. Like I was in some of the Idaho markets, great, great housing prices, rents were rough. I mean, depends on where you bought. So if you bought really high during COVID, which a lot of people did as they exited California or New York, as they moved in, they bought high because they sold high. They had the money to buy high, but now getting a rent rate in that town, cover it. I'm not seeing it. I'm not seeing those. So you really got to make sure that you bought right to even be in a situation where the rent will even cover the mortgage taxes, insurance, et cetera. So minimum to break even, you got to make that decision. Are you going to feed this if you rent it? Because you're not making enough or is it enough in the rising rent markets? The other thing is, do you have cash reserves for the vacancies and maintenance? And which also includes what I call TIs, which is your tenant improvements. So depending on, you know, again, your house, the interest rate, there's some variable decisions. So I'm just giving you the options whether you do it or not. When it makes sense to rent also is when your tax benefits like depreciation make renting attractive. When selling is smarter, it's when the markets are peaking and you're securing top equity, you're getting a lot of appreciation in the house, makes sense to sell. I've seen a lot of people sell in really great markets and then go to another market and actually become a renter. So it's not the same. It's not whether you rent or sell, it's they sold to go rent. And I have a lot of people that are higher net worth that are actually renting. And part of it is their strategy to decide whether they want to end their life. Like where's their last chapter going to be? So they're moving around to see different places. So staying in rent positions better. Some people I know are living in RVs doing that. So it's interesting. And do you sell avoiding landlord headaches? Because if you decide to be a renter, you're now in the property management business, unless you hire a property management, which will have a probably anywhere between a five and a 10% management fee. And you have to build that into your cost of coverage, right? So if you rent, you potentially are going to have additional costs going forward. It's up to you how you want to do it. Using the proceeds to reinvest for higher yielding opportunities. So I've seen a lot of people do that. In fact, I didn't actually buy or sell a home until I was 34, 35, when I had my son. I would buy doors. I would live in a door, renovate it, move on, move on. But I was constantly in a renter situation as I was acquiring a lot of wealth and then ended up buying my first home. So I did it a little different because I wanted to acquire assets than a lifestyle. Some of you are doing that in reverse. Now, the biggest implication I think is your tax. So if you own a home, this is very logistic for some of you, you can't just sell it to a company that you also own. You can put it in an LLC and then quit claim it from you over. But if you actually sold it, I mean, you're going to cause a massive internal tax implication. So the first person who you should talk to around this decision would be me through asklaurel.com. Ask a question, make a request. I'd love to have you on Ask Laurel. Ask a question. And then I can give a little better assessment of your personal situation. And then the next person would be a tax strategist. Not a CPA, a tax strategist to do some math for you. Is if you sell it, what happens? If you rent it, what happens? If you move it to yourself into an LLC, which then causes the rent. And even if you rented it just outright, outside of family members, I put it in an LLC or whatever kind of entity that your tax team tells you to do. Most properties are in LLCs. So up to you how you want to do it. Again, my job is to help give you a bunch of options. So sometimes when you buy a larger property and you actually end up in a jumbo loan category and 2025 standards is $806,500. It was at one point down as low as $485,000 right after COVID. Jumbo loans were like crazy low, a low dollar amount. They used to be millions and usually it's one, one five. And what a jumbo loan does, it obviously stacks on a lot more interest. It's a higher qualification, but it's also more expense to it. So just notice where you are in that category. The other thing that hasn't talked about, which I'm going to just bring up would be by selling a home, depending on your status and what you've done. If you're single, you can move 250,000 of that to a new property and go again. But then again, you've got to do the math equation of are you going into a higher interest rate loan over here? If you are a couple, you can move 500,000 tax-free to a new home. So again, lots of variables of whether you sell, whether you rent up to you, how you do it. I've done both for very different circumstances. So this is really a pros and cons decision. Make sure you're subscribing to my channel five days a week. Please click that notification button. Share this with a lot of friends. Keep in this conversation about money. You can't ask a question. You can't be in a conversation. So again, go ask questions as many as possible. And the way I love you asking questions is ask questions from the book that I know you're in the content. I know you're really working to consume it. And instead of making an assumption about what you've read, because I do talk about whether you take out Helix and whether you leverage equity in your house to go do other assets. Sometimes that's a growth strategy. Sometimes not. Ask the question before you just jump. Don't want you to get yourself in trouble. Again, the biggest do is do an ROI, return on investment cashflow analysis. And if you don't know how to do that, this is where your tax team comes in. So do talk to a tax strategist if you don't have one. I have a lot of them. I think I have the best in the country, super strategic. They use all of the code. Most CPAs use a little bit of the code and keep you as a sole proprietor. And worse, trust attorneys, I'll speak about them. They have your house held straight to trust. Sometimes right, sometimes not, depending on again, what your goals are. What you don't do is nothing. Don't do the ROI. Don't estimate your taxes and don't know what your outcomes are going to be, and then get surprised and irritated at the end of the year. So just be mindful as you make decisions. Don't park and pray. Be a learner. Lean in and learn. We'll be back tomorrow with more of it.