This question was brought to my attention when speaking with a friend. He recently bought a new home, only to be presented with the opportunity to move across the country. This left him the choice to either sell or lease his house. In case you’re facing a similar dilemma, we’ve outlined the benefits to each so that your decision can be a bit easier.

Should I Lease or Sell?


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Benefits of Leasing

1. A new source of income.

If you can charge a rental price that’s enough to cover your mortgage payment and associated homeowner expenses (insurance, repairs, and upkeep), then leasing your home is a smart way to gain a new stream of income.

2. Your home will be considered an asset instead of a liability—which means you can take out a second mortgage.

It is possible to get approved for a second mortgage if your home is reclassified as an investment. A residential property becomes an investment property when the owner leases the property to tenants for at least one year. After this one-year mark, your mortgage lender no longer views your home as a debt, but rather as a generator of income and therefore an asset. You are now able to use this asset as a guarantee against your second mortgage.

3. In general, it’s easier to find tenants than buyers.

If your house needs renovations to sell at your ideal asking price, you don’t have to make the investment today. Renters are less picky than buyers about the condition of their residency because their move is not permanent. If your neighborhood is a desirable yet affordable place to live, you will have an easier time finding tenants.

4. You’ll be entitled to a number of tax deductions.

As a rental property owner, there are a number of expenses that you can write off in your taxes, which means more money in your pocket. Home repairs, local and long-distance travel, insurance, and interest are all items that are either partially or fully deductible from taxes.

Plus, you may be eligible for the capital gains tax exemption when you decide to sell your rental property. This means that you won’t have to pay taxes on the full selling price of your home.

Reasons to Sell

1. You need cash towards your new home.

Most homeowners plan to purchase a new home in the same timeframe as selling their old one, and they often need the money from the sale for the purchase.

But what about taking out a second mortgage? Unfortunately, it’s tough to get a second mortgage if you haven’t leased it for a year, because a residential property is considered a debt to be paid and therefore a liability. Without a sizeable down payment to bring to your lender, having mortgages on multiple residential properties is not an option.

2. You don’t want to worry about the state of affairs with your investment property.

Keep in mind that if you lease your house, you are still responsible for making repairs. Either you can make the repairs yourself or hire a reliable handyman for approximately $55-$75 per hour. Completing repairs yourself will help you save money but hiring an expert can be a great option if you aren’t the handy type.

If you prefer hands-off property ownership, you may want to consider hiring a property manager. Property managers can handle everything from start to finish. Their responsibilities may include showing the space, selecting the tenants, fielding complaints, organizing repairs, collecting rent, and evicting tenants who do not pay. But remember, a high-quality property manager comes with a price tag! Most property managers charge 6-8% of the monthly value of the property for their services.

3. You don’t want your money tied up in a house.

Many people prefer to hold their wealth in property because it is a tangible asset that feels more real than buying stocks. That said, real estate is an illiquid asset, meaning that you usually cannot sell it right away. This illiquidity, along with a generally lower rate of return than stocks, deters people from leasing.

While becoming a landlord might not be for everyone, it certainly has its benefits. Take careful consideration of the benefits and drawbacks to becoming a property investor—you’ll thank us later.


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