Should I Sell My House and Rent In California
Homeownership ranks high as a key adult aspiration. Many work extra to gather funds for a down payment and maintain a favorable credit score for a mortgage. Yet, some still opt for renting for various reasons.
Deciding whether to sell your house and rent hinges on your future plans. If stability and investment rank high, holding onto your property is advisable. Conversely, if easy relocation and avoiding repair costs appeal, renting may be preferable.
The choice between renting and owning can be daunting without weighing their advantages and disadvantages. Thankfully, this guide outlines them all, aiding in your decision-making process.
Owning a Home vs. Renting a Home: An Overview
Buying or renting a home is a significant decision impacting your finances, lifestyle, and future plans. Both involve consistent income to cover expenses and dues, along with occasional maintenance costs.
Despite similarities, buying and renting differ notably. Renting offers flexibility without property commitments, while owning presents long-term investment potential.
However, homeownership isn’t universally superior, and renting isn’t necessarily effortless. It’s essential to weigh the advantages and drawbacks of each option thoroughly.
Pros and Cons of Renting a Home
Most people decide to rent primarily because of their financial situation. But some other factors aside from money may influence us to rent, such as age, long-term goals, lifestyle, and the number of family members.
According to Pew Research Center, 36% of the 122.8 million households in the United States were occupied by renters in 2019. To help you understand what you are getting into should you decide to be part of this statistic, here are all the pros and cons of renting.
Pros of Renting
No Downpayment
When you decide to rent, the landlord or property manager typically requests a security deposit. This is more affordable compared to the down payment required for buying a new property.
For instance, a security deposit usually equals one month’s rent, while a home down payment can reach up to 20% of the property’s market value. That’s a substantial upfront expense.
Less Strict Credit Requirements
Most landlords also run a credit check before they allow you to rent their property. Even if your credit score is fair or poor, you still have a chance at renting.
Landlords, especially the independent ones, accept renters with low credit scores even though the rental market is tight. If you’re lucky, they won’t even check your scores at all. This is as long as you are able to pay the required security deposit.
Lower Rent Amount
Even though the national median rent in the United States reached $1,827 a month in April 2022, it is still less expensive than a monthly mortgage payment to a creditor.
Unless you are renting a huge house or apartment, expect that the amount of money you need when renting won’t put you in much financial risk.
No Property Taxes
Property taxes can vary widely based on where the property is and how much it’s worth, often reaching thousands of dollars. This can be a significant financial strain, particularly for homeowners still paying off their mortgages.
Renters don’t have to worry about property taxes because the landlord or property manager handles those expenses. If you’re a homeowner feeling overwhelmed by property taxes, transitioning from owning to renting may be a practical solution.
Cheaper Utility Costs
Most rental properties are compact; thus, they are more affordable to power than most houses. Expect that your electricity bills won’t be as expensive as when you own a two-story house. This is also the case for other utilities like water, internet, sewer, etc.
No Repair Bills or Maintenance Costs
When you rent, your landlord covers upkeep, repairs, and upgrades. If something breaks, like a leaky faucet or damaged roof, just give them a call and they’ll handle it.
But if you own your home, you’re responsible for all repairs. This can be tough, especially if money’s tight and you’re trying to sell your house locally.
Access to Luxurious Amenities
If you’re renting in an upscale apartment, chances are, you have access to a fitness center, pool, or other amenities that you would otherwise build or pay to access if you were a homeowner. Landlords build the cost for these amenities into your monthly rent, so there is no additional charge.
Not Affected by the Rocky Real Estate Market
The property market can be unpredictable, causing fluctuations in property value, property taxes, and mortgage payments.
Renters are less affected by these fluctuations compared to homeowners. In fact, renters may not be impacted at all during a slowdown in the housing market.
If you notice stagnant property values or a seller’s market in your area, it may be wise to sell your home and rent instead.
Ease of Relocating and Flexibility in Choosing Where to Live
When you own a home, your choices for living are limited, but renters have more freedom in their location. Homeowners must sell their property before moving, which can take a long time unless they find a cash buyer. Renters, on the other hand, typically have leases for a year and can often end them early by giving notice.
Lower Insurance
Renters and homeowners both get insurance, but renters only pay a little. And it covers almost everything, even furniture and valuables. The Insurance Information Institute says homeowners pay $1,259 a year for insurance, while renters only pay $179. With such a big difference, renting saves a lot on insurance costs.
No Long-Term Commitment
The beauty of renting is that you only need to sign a lease for 12 months. That means you aren’t tied to a property, and you can choose whether to renew the lease or move out after the contract has expired.
Cons of Renting
No Right to Ownership
Renting means you don’t have any right to the property. You cannot make changes or improvements to the house just because you saw something cute on Pinterest. You cannot arrange for someone to live with you unless the landlord or property manager approves. And most importantly, you cannot earn equity in the property.
No Permanence
One of the biggest disadvantages of renting is the fact that it doesn’t offer permanence or stability. Even if you rent a house for decades, it is still not yours at the end of the day. Each time your rental contract expires, you could be asked to move out.
Bad Neighbors and Landlord
If you’re unlucky, you may encounter a problematic landlord—someone neglectful of upkeep or sluggish in communication. Owning a home means being your own landlord! You may also face bothersome neighbors. In most rental situations, properties are close together, making it difficult to escape noise. However, homeowners typically enjoy greater privacy from neighbors.
No Tax Incentives
You can’t deduct rent on taxes like you can with mortgage payments. So, you still owe full taxes, and your monthly payments just go to your landlord, likely helping them with their mortgage and tax deductions.
Bound by the Terms of Contract
When you rent, you will sign a lease of ~12 months and pay a security deposit. Depending on what is in the contract, you may not be allowed to make any house improvements, be charged for late payment, be forbidden to move to another rental without a month’s notice, etc. This means that you have less control of your housing situation.
Pets May Not Be Allowed
Lots of rental properties don’t permit pets to avoid damage or bothering neighbors. If a rental does allow pets, there are usually fees involved, but many big pets are still not allowed. So, if you have a Saint Bernard or a Great Pyrenees, finding an apartment may be tough.
No Fixed Rent Amount
Even if your monthly rental cost is lower than a mortgage payment, it’s not guaranteed. Simply put, the landlord may raise the rent when renewing the lease to boost their rental earnings, align with the property’s market value, cover higher tax obligations, or fund upgrades. When deciding between selling your home and renting it out, keep in mind the likelihood of annual rent hikes.
Always at the Mercy of the Landlord
The downside of not being required to make repairs to the rental property is that you have to wait for the landlord to make repairs. Some landlords won’t hurry to fix these things or if they do, they’ll do it cheaply, so their rental income won’t be affected.
Pros and Cons of Owning a Home
Based on data from the United States Census Bureau, the home ownership rate in the nation for the beginning of 2022 hit 65.4%. This shows that owning a home remains a key aspect of the American Dream— which makes sense considering the sense of security it provides.
Nevertheless, it’s crucial to recognize that in comparison to renting, owning a home has a greater influence on your financial situation and daily life. To determine whether you’re in a better position as a homeowner or a renter, consider these advantages and disadvantages.
Pros of Owning a Home
Equity Buildup
Equity, also tagged as “forced savings,” is the difference between the market price of your home and the mortgage you owe. As your home appreciates over time and you pay down your mortgage, you build equity. However, equity in your home is hard to access unless you take out a HELOC or sell your home.
Long-Term Investment
The price of your house goes up over time. So, if you live in it for a while, you can make more money when your real estate agent sells it (especially when there are more buyers than sellers).
If you sell when lots of people are buying, you can get more money, but if you sell and buy another house, you may lose that extra cash. But if you sell and rent instead, you may have a chance to buy again when fewer people are buying houses.
Increase in Credit Scores
When you take out a home loan, your credit score may drop, but it’ll go up soon as you keep up with your mortgage payments.
Having good credit matters for getting loans but paying rent doesn’t boost your credit like paying a mortgage does. Just paying rent won’t help your credit score much.
Full Control Over the Property
Unlike renting, you have full control over your primary residence if you are a homeowner. You can make renovations and improvements however you like. You can also allow pets inside your own home, no matter their size.
In some cases, there are a few rules to follow when your home has a homeowners association (HOA).
Privacy
Living in a rental, privacy is limited. You’re in close quarters with neighbors, leaving little room for personal space. Buying a home offers more privacy. No landlords intruding, and you’re spared from hearing your neighbor’s Saturday morning drum sessions.
Fixed Rate Mortgage Payments
After your rent finishes, rents may go up, but your mortgage payments and fixed interest rates stay steady. This means you’ll pay the same each month. Property taxes or insurance may change occasionally, but not as frequently as rent hikes.
Stability
If you want stability for your future, a home purchase is highly suggested. One of the greatest allures of homeowning is the fact that you have a roof above your head until selling your home. You’ll also have a strong community and social ties since you’re settled in one place.
Downsizing is Possible
If you choose to move to a smaller and cheaper home, you can do it smoothly. This option to sell and downsize is beneficial for lots of older folks who want to be nearer to family.On the other hand, if you rent, it’s tough to downsize since an apartment is already quite compact. Sure, you can move easily, but there’s no value to take out in the process.
Tax Benefits
One of the core benefits of homeowning is its tax benefits. You can deduct most of your current home expenses from the taxes you need to pay to the government. This includes your mortgage interest, local, state, and property taxes, and the interest rates of home equity loans.If you choose to sell your home and rent, pay attention to capital gains. Capital gains tax is required if the profit from your home sale is $250,000 for singles and $500,000 for married couples.
Cons of Owning a Home
High Upfront and Ongoing Home Costs
When you decide to sell and then buy another property, be ready to put down a significant amount upfront because home prices have gone up lately.When selling, get ready to pay for real estate commission and closing expenses, like the appraisal fee, home inspection, mortgage insurance, title search, survey fee, title insurance, property taxes, and more. These costs could be around 2% to 5% of the sale price.When buying, you’ll have your monthly mortgage payment along with taxes, utilities, maintenance, insurance, etc. If you want to make your living expenses simpler, renting may be a better option for you.
Property Value in the Housing Market Can Depreciate
Sadly, not every property appreciates in worth over time. Your home may decline in value, especially if you purchased it during a housing market peak.If you can’t keep up with maintenance, your property’s value could drop. This commonly happens with cluttered homes, condemned properties, and properties needing renovations.While selling real estate at a loss isn’t ideal, if you’re tired of managing it, you can sell your home and rent instead, letting your landlord handle repairs.
Repair and Maintenance Costs
Besides the high initial expenses and monthly mortgage payments for your ideal property, you must also consider the expenses for maintenance and repairs if you own a home.
While you can handle certain home repairs yourself to save money, some issues require professional attention. Simply factoring in mortgage payments isn’t enough if you plan to retain ownership of your property. It’s advisable to allocate funds each month to cover maintenance expenses as they occur.
Less Mobility
Owning a property makes it tough to relocate compared to renting. This could be an issue if you’re considering a job opportunity in a different city.While you can sell your home and relocate, selling may be a lengthy process involving real estate agents, depending on the local housing market. Plus, if you haven’t owned the property for long, you may not make much profit from the sale due to limited equity.
Taxes and Fees
Some of the regular fees you have to pay as a homeowner include property taxes, HOA fees, homeowners insurance, private mortgage insurance, utilities, and maintenance.Individually, the amount seems manageable, but if you look at it collectively, it can be pretty overwhelming, especially if you’re still paying for a monthly mortgage. If all these fees seem daunting to you, selling your home and renting makes sense.
Final Thoughts: Should I Sell My House and
Rent In California?
We can’t definitively determine if renting or owning property suits you best because everyone’s objectives and financial situations vary. However, we trust that after reviewing the extensive pros and cons of renting versus owning real estate, you’ve gained clarity on which route to pursue.
If you opt to sell your property and rent instead, reach out to us at JiT Home Buyers. We’ll buy your house for cash (and we’ll do it fast!), so you can leave the headaches of home ownership behind.
Complete the form below or reach us at (510) 473-5885 for further details on selling your house in California.
California Resources
We Buy Houses AS-IS In California
We are a local real estate investment company in California that buys houses in any condition. We also buy mobile homes and condos in any condition. You can sell your house fast for cash regardless of the condition.
Our service area includes homes in San Francisco, San Jose, Sacramento and throughout California. Our goal is to serve homeowners with a simple solution when selling there house fast.
You can start the process to sell your house fast by calling us or filling in the online form. We will respond back to you the same day and present you with a fair cash offer for your house. If you accept our cash offer for your home, you can schedule a closing date and get cash for your house.
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The Easiest Way To Sell Your House Fast In California
You’re in the driver’s seat when you accept our cash offer for your house. We make the process simple, fast, and easy to follow when working with us. You have no obligation to accept our cash offer for your home when contacting us for a fair cash offer for your home. No matter the reason you want to sell your house, we want to buy your home as is. Remember that you get many benefits that include no real estate agent commissions, no cleaning, no improvements, and no stress. Our cash offer for your as-is house assures you of fast cash payment at closing with a reputable Title company. You can count on our company to give you a fair cash offer for your home! If you’re still thinking, “I need to sell my house fast”, calling us could be your best decision all day. 🙂
Author: Saini
My name is Saini, and I founded the JiT Home Buyers team with years of experience in the real estate industry. I have assisted numerous sellers in selling their homes quickly, “AS-IS”, and for a fair price.
He’s been featured in multiple publications including Yahoo Finance, GoBankingRates, LegalZoom, The Mortgage Report, Apartment Therapy, US News and World Report, and SuperMoney among others.