The American dream is often said to include owning a home, and while it is possible, it is not always practical. Some situations may arise that force you to rethink your homeowner status and consider renting instead. But when exactly does it make sense to do this?
This post reviews the circumstances that could make becoming a renter the best decision you ever make as well as some drawbacks you may face. If you are thinking about selling your home, RPM, a Thousand Oaks property management company, is ready and willing to help you get the best prices.
When Should You Sell Your Home?
Owning a home is a great source of pride and joy for many Americans, but there are scenarios where it is more feasible to rent a house. Such situations include:
- Being Upside Down
Losing your job can be a major setback, especially if you are the only earner in your household. If you lose your income, have no emergency fund, and can’t see yourself getting another job fast, you should consider selling your home. Doing so will reduce your housing expenses and might even free up some capital from your home’s equity.
“Upside down” is a real estate term that means you owe more in mortgage than the current value of your home. If you are upside down and unable to change the situation, selling your home and renting a less expensive house might be a good idea. Consider an agreement where your lender agrees to accept the selling price of your home even if it is less than your mortgage, otherwise called a short sale.
Note: Short sales can be complicated and can impact your credit. Before agreeing to one, consult a Ventura County property management expert.
Debt can be tough to deal with, especially when paying a mortgage. While selling your home should not be your first response to debt, it can be necessary when your mortgage payments are too hefty, and your situation is not improving. This is true after measures such as taking a second job or selling some property have failed.
Tip: Your mortgage payments should be less than 25 percent of your net income. If it falls between 40 and 50 percent, you may consider renting unless you can turn the situation around.
As a retiree, the last thing you want to worry about is paying for homeowner’s insurance and property tax. If your home has excellent equity in it, selling it will allow you to free your capital and invest it elsewhere so your assets are more liquid. It will also reduce your time and energy investment in maintaining and repairing your home.
Important: When you drop your homeowner’s insurance coverage, make sure to replace it with renter’s insurance, so you are still protected.
Potential Benefit: Higher Asking Prices in 2021
Mortgage rates in the United States hit a record low at the beginning of 2021, and according to Black Knight, the number of homes on the market had reduced by 40 percent by late April. This situation created a buyer’s demand that shifted the market in the seller’s favor. Currently, it is harder than usual to find a home, and buyers are in a rush to outbid each other, making sellers huge gainers.
In terms of price, the median home selling price rose by 16.2 percent of last year’s numbers within the first quarter of 2021. This margin is expected to go down as the economy regains its balance, but now is still an excellent time to sell your home.
Essentially, these numbers prove that selling your home in 2021 could fetch you the best prices yet. This is a huge pro if you are considering renting.
Other Benefits of Renting Over Owning a Home
Besides the higher rates, which are seasonal, other standard benefits of renting a home over owning one include:
- Capital Creation
- Lower Costs
- Time Management
Selling your home allows you to tap into the equity in it, free it, and invest it elsewhere. For example, if your home is worth $800,000 and you owe $200,000, you can sell it and free up $600,000, which you can direct toward a money-making venture.
Being a homeowner comes with its own share of costs and expenses. When you own a home, you must make your mortgage payments and pay taxes for upkeep and insurance. This can be a lot of money compared to rent, which is all you need to worry about as a renter.
Aside from the expenses, a home required tending to and maintenance. This requires a time investment and knowledge of the best repairers, pest control experts, and gardeners in the business. As a tenant, you only need to call your landlord to get repairs done.
Potential Drawback: Renting Is a Hassle
Yes, selling your home and renting has its benefits, but it’s not for everyone. One major setback of becoming a tenant is that you don’t have as much freedom over your home as you did as a homeowner. You must learn to live with your neighbors, which sometimes means watching how loud you play your music or giving up your pet. All in all, you will need to make some sacrifices.
There is also the issue of rent, which is likely to rise over the years, unlike a fixed mortgage. That said, you can limit any future discomfort by doing your due diligence before renting an apartment.
Ventura County Property Management
The decision to sell your home and become a renter can only be arrived at after careful consideration of the possible pros and cons. As you consider your options, remember that while housing prices are currently high, housing inventory is likely to open up as the year progresses. This means that the market is the ripest now for sellers.
At Real Property Management Ventura County, we are dedicated to helping you make the best of the real estate market. Our professionals are highly skilled and experienced in property management in Thousand Oaks and are up to date with the current market dynamics. Contact us today to discuss your options.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.