Wondering whether to sell your house and start renting? Learn about the pros, cons, and financial implications in our detailed guide.
Given the ever-changing state of the real estate market, it can be challenging to know when to buy, sell, or stay in your current abode. In a seller’s market, where the average sale price is higher, you can get more out of your home by seizing the opportunity to sell. But if you’re moving into a new home, you suddenly find yourself on the buyer’s side –– falling victim to the same sky-high prices that helped you get more out of your old home. In a buyer’s market, you experience a similar phenomenon of enjoying lower interest rates and home prices but getting less out of your home when you decide to sell.
Then there’s what seems like the simplest option: staying put. Sure, this may work for some people, but if you’re an older homeowner seeking a smaller, less expensive space, your current setting just might not be meeting your needs anymore. Nearly 70 percent of older homeowners say they plan to age in place.1 So, whether you’re looking for a better place to age comfortably, or need access to your home equity, the question, “Should I sell my house and rent?” may come to mind.
Below, we will unpack the benefits and limitations of selling your home and becoming a renter. Then, we outline some situations where this may be the ideal solution.
There are several essential questions to ask when renting a home, and this decision should not be taken lightly. Switching to life as a renter is a multifaceted change –– influencing personal, financial, and lifestyle factors. For many homeowners, their home is their most significant asset, and selling this property can feel like venturing into uncharted territory or letting go of a decades-long investment. For others, however, selling a home can represent a strategic move toward a simpler, more adaptable, and potentially less burdensome way of living.
Whether selling your home and becoming a renter is right for you will come down to a number of factors like your long-term financial goals, current market conditions, personal circumstances, and preferences for your post-retirement lifestyle. Taking inventory of your priorities (now and in the future) will be instrumental in helping you decide whether this move is right for you. For instance, if you're nearing retirement, the appeal of life as a renter –– free from extensive home maintenance –– might outweigh the benefits of home ownership. Or, if you’re already enjoying retirement, the home equity you’ll receive from a sale might allow you to enjoy more financial flexibility.
But beyond the pragmatic sides of decision-making that focus on market conditions or retirement funds, you’ll also want to weigh the emotional significance of selling your home to become a renter. Owning a home provides a sense of stability and belonging that renting might not offer. And moving on from a home you’ve meticulously made your own over the years can be challenging. On the other side of the coin, renting can offer a sense of freedom –– allowing you to do things like see the world or move closer to the ones you love most. This decision is as much about understanding your financial position as it is about recognizing what you value most in your living environment.
Still on the fence when it comes to deciding whether to sell your home and rent? Don’t worry –– we’ll explore the full benefits and costs of this decision.
Making the switch from homeowner to renter can unlock numerous benefits, some of which will be immediately noticeable and others that tend to make themselves apparent over the longer term. This decision can be especially advantageous amidst certain economic climates or in specific life stages. Here are some of the many benefits of selling your house and stepping into the world of renting.
One of the biggest benefits of selling your home to become a renter is the potentially significant amount of capital you can free up. Once the sale is finalized, your newly freed home equity can be redirected into other investments –– like a retirement fund or a high-yield savings account. These funds can be used to pay off high-interest debts or simply create some financial breathing room as you traverse everyday life. Trading your mortgage for a lease eliminates one long-term commitment in exchange for the flexibility needed to adapt to (and thrive in) changing financial circumstances.
Maintenance can be one of the most significant hidden costs of homeownership, particularly roof and HVAC repairs.2 As a tenant, the responsibility for rental property maintenance and these costly repairs falls largely on the landlord. Choosing to sell your home and rent can significantly reduce the time, effort, and money that you invest in keeping up your home. Those seeking a more carefree lifestyle, like retirees, older adults, or even busy professionals, may be drawn to this appealing aspect of renting. You are free to enjoy life as a renter rather than having to be your own property manager.
Selling your home and becoming a renter can not only provide you with financial flexibility; renting also offers unparalleled flexibility in terms of relocation. Maybe you’re looking for the freedom to relocate for a job opportunity or to test out life in nearby neighborhoods you’ve previously only passed through. Or, perhaps you’re looking to leverage your home equity to see the world and simply need a comfortable space to collect your postcards. No matter the reason, selling your home and renting can accommodate greater lifestyle flexibility, allowing you to live life on your terms and without the stresses of homeownership.
In addition to unforeseen maintenance costs, homeownership comes with its own set of taxes. Property taxes are based on the value of your home –– meaning if you’ve got a more valuable piece of real estate in a popular locale, these rates could be quite costly. Renters, on the other hand, do not carry this burden, making this an appealing option for those living on a fixed income who want to reduce their recurring expenses.
There are many undeniable benefits of selling your house and becoming a renter. However, it’s equally important to consider the potential costs and limitations of this transition. Keep these factors in mind as you decide whether to sell your cherished home and become a renter.
Most notably, selling your home means cashing out your home equity. This can grant you additional freedom as a renter, but it also means you could be sacrificing the accrual of additional equity should your home continue to become more valuable. Pay close attention to current market conditions –– and forecasted future conditions –– to be sure you get the most out of your home should you decide to sell and rent.
A home can come with some unforeseen costs, but it does offer a great deal of stability. Namely, your monthly mortgage payment remains largely unchanged as the years tick on. Leases, on the other hand, are fixed for a given term –– but when the lease ends, there’s always the chance of a rate hike. This can result in a lack of predictability in your living expenses in addition to semi-frequent moves if a rent payment increase puts your rental out of budget.
Another drawback of becoming a renter is the limits on customizing your living space. Homeowners, for example, enjoy the freedom to remodel, renovate, and decorate a property to suit their tastes and needs, from bringing an outdoor garden to life to adding usable square footage to a home. But this isn’t to say you can’t make your rented space your own! You’re challenged to be a bit more creative with short-term adjustments to your space.
Renting eliminates some of the expenses associated with homeownership, but the experience can come with a few of its own. Security deposits and application fees are just a few examples, and in some cases, you may be required to carry renters insurance. Beyond these fees, rental costs can exceed those of a mortgage depending on where you’re located –– and if you’ve paid off your mortgage, the delta in these costs can be significant. Do your research to ensure you know every potential expense before making the switch.
Choosing to sell your home and rent is a significant life choice. And while this decision can unlock countless unforeseen benefits, it’s not for everyone. There are a few signs that may indicate that this is the right move for you, and recognizing these can help you make a more informed decision.
Should your career or lifestyle demand a high degree of mobility –– requiring frequent travel or a flexible work schedule –– selling your home and becoming a renter can be a more suitable option. And for retirees, or older adults soon to be retired, renting can provide the same benefit. As a renter, you have the freedom to get up and go as you please, whether to be closer to your grandchildren or see the world.
The decision to sell your home and become a renter has as much to do with your finances as with your lifestyle. So, if you have carefully evaluated your financial situation and found that freeing up your home equity is the best path toward achieving your goals, renting may be worth your consideration. With that said, the opposite is also true: If your long-term financial goals include investing in your home’s value or leaving it as an inherited property to your grandchildren, it may be wise to continue life as a homeowner.
Your stage in life can greatly influence the decision to sell your home and rent, and retirees –– or those nearing retirement –– will find the lower maintenance lifestyle that comes with renting to be especially appealing. As part of your retirement planning, consider how you’d like to spend this much-earned period of relaxation. If your imagination fails to conjure up laborious home maintenance tasks and unexpected repair bills, renting may be the solution you’ve dreamed of.
At the time of writing, most of the U.S. continues to enjoy a seller’s market in that property prices are higher due to a relative lack of housing inventory.3 If you’re a homeowner considering renting, the current market conditions could mean getting more equity out of your home and enjoying greater comfort as you age. But the conditions won’t always be right, so pay close attention to the market’s many ebbs and flows to be sure the decision you’re making is the right one for you.
No maintenance, no repair costs, no property taxes, and few strings –– life as a renter is just simpler. So, if this is the lifestyle you’re after and variables like market indicators and your financial goals are in alignment, it may be time to make the transition. But there is one downside of selling your home and renting: moving. Fortunately, there is a way to enjoy life as a renter without leaving the comfort of your cherished home.
Truehold’s sale-leaseback allows you to sell your current home in exchange for your home equity, then continue living in the space –– now as a renter. We’ll assume responsibility for property taxes, large repairs, and routine maintenance, meaning you can focus your energy on the things in life that give you the most joy. And if you do decide to move, you can do so on a more relaxed timeline, taking the time you need to find your next perfect place.
Another perk? You avoid the typical stresses of home selling — like hosting countless open houses and dealing with other potential buyers – in exchange for a competitive cash offer for your house.
So, should you sell your home and rent? Discover whether this transition is right for you by connecting with a Truehold advisor and exploring the benefits of renting your property with Truehold’s sale-leaseback.
Sources:
1. AARP. Despite Pandemic, Percentage of Older Adults Who Want to Age in Place Stays Steady. https://www.aarp.org/home-family/your-home/info-2021/home-and-community-preferences-survey.html
2. Investopedia. The Hidden Costs of Owning a Home. https://www.investopedia.com/the-hidden-costs-of-owning-a-home-4776306
3. CBS News. Experts discuss real estate trends for 2024: Will it be a buyers’ or sellers’ market? https://www.cbsnews.com/newyork/news/experts-discuss-real-estate-trends-for-2024-will-it-be-a-buyers-or-sellers-market/
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