Should I Sell My Home or Rent It Out?
One of the big decisions for military homeowners is whether or not to sell their home or hold on to the valuable property for the future and become a landlord. For some, the decision is a no-brainer; for others, their military life circumstances make the choice a little more unclear.
Don’t make your decision about selling vs. renting before you’ve learned what to expect in either case!
What to Think About if You Want to Sell Your House
You’re not the only military homeowner seriously considering selling your house, especially if you're facing the traditional PCS season.
Selling your house can make sense if you have equity built up in the home, you know you won't be returning to the location, or you have no desire to be a landlord and would prefer to close the door on owning this particular home.
Active Duty Calls
Chances are, the decision to move was made for you by the military, and unless you want to start a rental business, you’ll need to sell. If you’re on the fence and need some help deciding whether or not to sell or take on the new role as a first-time landlord, consider these questions
- Do you have the time to learn landlord/tenant laws?
- Will you hire a property manager?
- If you're marketing to military families, will they like the location?
- How much work does the house need to become a rental property?
- Do you have the cash to make the updates and future maintenance over the lease term?
- Do you anticipate the house needing significant repairs due to its age in the future?
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What to Think About if You Want to Rent Your House
There are plenty of advantages to keeping your home and converting it into a rental property, especially if your house is convenient to military renters— meaning proximity to the military base, strong schools, and lifestyle amenities. If your property has these features, you’ll have a constant stream of potential military tenants. You’ll also continue to build equity and watch the market value of your home go up.
But even during high-demand rental markets, when you’re confident you'll find tenants quickly, landlord life is rarely as simple as it sounds. Learning your state and federal laws, managing tenants, and maintaining the property only scratches the surface of a landlord’s challenges.
That's why we've created the free guide below: The Military Landlord: What to Know About Renting Out Your Home.
DIY Property Management or Professional Services?
Military members often choose the rental path not only for an extra income stream, but because they anticipate coming back to their home in the future. With that goal in mind, you’re certainly invested in the upkeep and care of the property while you’re away.
The question you’ll need to answer is whether or not you can manage the property on your own, possibly from a long distance, or if you’ll need to hire a professional property management company.
Property management services range from full service— marketing, maintenance, payment collection, and more— to simply handling the paperwork. Depending on the level of service you choose, you can expect to pay on average between 8% and 12% of the monthly rent collected.
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More Rental Property Considerations
If you’re still feeling like a rental property idea is a good idea, take your considerations to the next level before committing. Here’s more to think about:
- Consider hiring a real estate professional to help you run the numbers to see if your rental business is viable.
- Are you ok with solo landlord duties if your spouse leaves town for work?
- Your rental property is a business, and the best landlords treat it as such. You’ll need to track receipts and documents, plus have a new level of income tax savvy when it comes time to file.
- To maximize your profits, you need minimum vacancies and awesome tenants who are trustworthy.
- Legally screening tenants is a big part of a successful rental business.
- Can your property sustain future renters?
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Tax Implications When Selling or Renting a Home
When dealing with income from selling or renting your home, you’ll have to consider the tax advantages and disadvantages. Keeping up with the details can be tricky for first-timers, so it wouldn’t be a waste of time to consult with a real estate tax professional, especially if you’re renting your home. These are some issues to keep an eye on:
- Capital gains tax
- Rental property tax deductions
- Years needed to claim primary residence
- Qualified official extended duty exemptions
There’s a lot to know about taxes and your rental property or home sale. Read Important Tax Matters for Military Families When Selling or Renting a Home for an in-depth overview.
Deciding whether to sell or become a landlord isn't always an easy decision. However, sometimes the hard facts just point you in the right direction. As long as you consider the major pros and cons of each choice, you’ll go into the decision making process educated with less room for trouble to sneak in later.
For even more information, grab our free guide below, PCS Ahead: Should I Sell or Rent My Home?