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4 Reasons to Avoid Selling Your Starter Home (and Rent It Out Instead)

4 Reasons to Avoid Selling Your Starter Home (and Rent It Out Instead)


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RentOnce a homeowner has invested in their starter home they often think of what they will do with it when they decide to update later in life.  Often, homeowners sell their previous property to help pay for their next one. However, more homeowners are deciding to hold on to their starter properties to rent out and make a continuous profit.  

Consider these four reasons to rent out a property instead of selling.

Profit Not Needed for Another Property

Those that have to use the profit from their house sale to invest in their next property have to complete the sale process.  If a homeowner does not need to use the profit to invest in their next home they can consider renting out their current property.  Those that own their home and have started saving for their next one are able to get a mortgage without using profits from a sale.

Second Mortgage

If a homeowner has a mortgage on their current property they need to find out if they can qualify for a second mortgage.  Lenders are not going to consider possible income from a rental when qualifying a person for a second mortgage. The homeowner needs to have a low enough debt-to-income ratio that they can financially handle both mortgages in the worst-case scenario that they cannot find a renter.  

The Market Isn’t Right

Renting until the market is better suited for a sale is one option that homeowners take to maximize their profits.  When the housing market favors buyers it is a great time to invest in a property. A homeowner may want to buy their next home while home prices are down.  But they do not want to sell when buyers hold all the power.

A homeowner that has not lived in their house for long is not likely to make a profit off of their sale.  There needs to be a significant amount of time that has passed for the house to appreciate. Keeping a property until it has appreciated can help a homeowner make a much larger profit.

Always look at the comparable properties in the area that have recently sold.  Their prices will give a homeowner an idea of how much they are able to sell their own home for.  

If the sale prices of the homes are enough to make the homeowner a profit they may choose to sell or they can hold out until the market is more favorable.  

Ready to Rent

Trying to turn a property that needs a lot of work into a rental is going to take time and money.  No renter is going to allow their property to be ill-maintained. Renters certainly will not pay top dollar for a property that is falling down, either.  A homeowner must make sure their property is rental-ready before looking for renters.

Check the demand for rentals in the area.  If there are only buyers looking to make a purchase it may be hard to find someone to pay the asking rent price.  However, if the area is renter-friendly and there are many people looking for rentals it will be easy to find a renter.  

There are pros and cons to every decision a homeowner can make with their property.  There is a good time to sell and there are situations where it is better to rent out a property.  A mixture of rental demand and a homeowner being in the right financial position may allow them to rent out their current property to help them make a profit.  

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