Many investors who purchase real estate properties usually finance these investments through mortgage plans. Applying for a mortgage basically allows anyone with a half-decent credit score to take out a loan to purchase a real estate property for whatever purpose he/she has planned it for. Buying a property through a mortgage is a good plan for many people who are able to dedicate a portion of their salary to the monthly mortgage payments. But what do you do if you are finding it difficult to handle the mortgage payments? You might be thinking, “Should I sell my house or rent it out?” The answer is simpler than you might think.
When faced with an internal dilemma of “Should I sell my house or rent it out?”, it probably means that you are finding it hard to manage the expenses of your investment property. But this isn’t a time to panic; having trouble in meeting mortgage payments is not the end of the world or the fall of your investment dreams. There is always a way out of such a tough situation. Renting out your property is without a doubt the answer to solving this problem. Some might argue that selling the property altogether is a solution, but logically it does not make any sense for many reasons.
Should I Sell My House or Rent It Out?
When you stumble upon the question “Should I sell my house or rent it out?” because I cannot make the monthly mortgage payments, there are a few points you need to consider:
Renegotiate the Mortgage Agreement
This is probably the first step that you would need to take when you see that you are falling short of meeting mortgage payments. Doing this is taking a step in the opposite direction of selling the property you own. Truth is a financier would prefer to renegotiate the terms of the mortgage agreement rather than not receive any payments for a while. Try to get a lower interest rate on the mortgage or expand the lifetime of the mortgage to make it more affordable every month. “Should I sell my house or rent it out?” is a tough question to answer, but making the mortgage easier to pay moves you closer to renting it out as a primary option.
Related: All You Need to Know About a Mortgage for Rental Property
Rental Income Cash Flow
Every property can be rented out for a price. This option can be optimized of course if the house or apartment has more good qualities like location, available services, modern furniture, and ideal size. If you are having trouble in paying your mortgage and you are unable to renegotiate your mortgage agreement, then it’s time to think about ways to make rental income fast. There are two ways to get rental income, either through long-term rentals or short-term rentals, with each of them having its own pros and cons.
Related: 5 Ways To Create A Positive Cash Flow Income Property
Long-Term Rentals: The traditional form of rentals where you offer your investment property to be rented out for a long period of time to a tenant is probably a secure way of getting that extra money you need to cover your mortgage. With long-term rentals you won’t have to worry about the next 4-5 months when it comes to rental income because you have a lease contract already signed with a tenant. Consider a worst-case scenario where your property will be rented out for $500 only after all expenses have been deducted. That amount alone can be enough to cover your entire mortgage payment, thus giving you the chance to keep your house without ever thinking of selling it.
Short-Term Rentals: Now, this form of rentals is considered more risky and unstable because it requires a good location and being in a big city for it to be consistent and profitable. However, if you are living in a big city like Miami or Los Angeles, then you must consider this option to generate money for your mortgage payments. Short-term rentals like Airbnb require more work and time to ensure they bring you profit, however, the amount of money that can be made in one month using Airbnb can be as much as triple what can be made in traditional rent. It is a good strategy to follow to passively make money in a short amount of time.
Selling the Property Is a Bad Investment Decision
You know how they say in the business world to never give up on your investment simply because you are short of money to fund it. Find a way to make it all work and it will be repaid at the end. The same applies in real estate investing, so remember it if you are faced with the question “Should I sell my house or rent it out?”. Consider this as an example: if you have owned a property for 2 years already and have 13 more years of mortgage payments, then selling the property means you will have lost 2 years of mortgage and interest payments. Why lose a considerable amount of money you have already paid? The purpose of the investment is to make you more money, not lose from it. This is why renting out the property makes more sense. The only case in which selling your investment property would make more sense is if the property has reached a maximum appreciation rate or you know for a fact that the local housing market is about to decline. Selling for an appreciation value that can make you profit instead of a loss or break even is the only reason to sell. That logic should answer your question “Should I sell my house or rent it out?”
It’s a Buyer’s Market
The real estate market has come to favor those who buy properties more than those who sell them. This is because of the rising values of properties, rents, and the boom of the real estate market as a whole. If you go ask any real estate tycoon “Should I sell my house or rent it out?”, you will be met with a similar answer. If you have invested in a good property, which is in a healthy growing market, then it is better you hold on to it by any means necessary.
Related: Is it a Buyer’s Market or Seller’s Market?
Should I Sell My House or Rent It Out?: Conclusion
All the points discussed on the question “Should I sell my house or rent it out?” have all lead to one answer. The best solution, considering that the investment you made is decent, is renting your rental property out to make money to fund your mortgage payments. Being an investment property owner is a safe investment that offers low risk and good return on investment, so why lose it when you can just fund it.