Whether your second home served as a beloved vacation spot or was intended as an investment property, you’ve determined that it’s ready for its next step.
But choosing the right path can be complicated—and confusing.
Here are three thought-provoking questions all property owners should ask themselves when asking: “Should I rent or sell?”
Is it better to sell or rent my house?
Deciding whether to rent or sell a second home requires you to think critically about your local market and the long-term benefits of each option.
Reasons you may want to sell your home:
- To capitalize on extraordinary demand in your local real estate market
- To address pressing personal financial matters
- To offload a property that needs extensive repairs
Reasons you may want to rent your home:
- To offset your mortgage, property taxes, and maintenance costs while you continue to build equity
- To generate long-term cash flow from your rental property
- To continue enjoying your home while sharing it with vacation rental guests
Will renting my homework with my lifestyle?
Common barriers to owning a rental property are upkeep, tenants, and the tricky job of balancing your personal life with the demands of your rental home.
Long-term rentals offer property owners the opportunity to build rapport with a few tenants at a time.
But in exchange for what could be a more “stable” relationship, you may make less from renting your property monthly than you could on a nightly basis. Additionally, long-term tenants may not immediately notify you of problems in your home, leaving you with potentially higher maintenance costs in the long run.
As such, both real estate investors and everyday property owners have increasingly set their sights on growing vacation rental markets.
Vacation rentals (a.k.a. short-term rentals)
As guest preferences shift away from hotel accommodations, property owners have found it easier to see how short-term rentals offer benefits of renting with fewer of the common drawbacks—especially when a capable vacation rental manager cares for the property.
Long-term rentals vs. vacation rentals
|Long-term rental||MJS-managed vacation rental||DIY-managed vacation rental|
|Home care||Coordinate with tenants for home repairs and upkeep||Local team alerts you to issues and arranges repairs with trusted vendors||Find vendors and schedule repairs on your own|
|Income||Lease at one rate over a long period||Rent at variable nightly rates to maximize revenue||Set rates or buy one-size-fits-all pricing software|
|Who’s in your home||Find and screen potential tenants||Screening networks, 24/7 guest care, and booking support||Manage and respond to guests’ needs 24/7|
|Cost||Your time to DIY, or fees to hire a property manager||A tailored fee based on your unique home and local market||Your time, plus separate fees for marketing and pricing services, cleaning supplies, and more|
As you can see, the rental options available to you as a second home owner each have their pros and cons. It’s a good idea to sit down and consider your life as it is now and your plans for the future, both personally and financially.
What’s the financial impact of renting vs. selling?
Whether renting or selling is the better financial decision depends on your personal financial life and your home itself.
Our two cents: if renting could be a good option for you, we say go for it.
Why? When you sell your secondary property, primary residence, investment property, or any other real estate asset, you cut yourself off from positive market changes that impact your home’s value.
Using your home as a rental—especially a vacation rental—is a wonderful way to continue building equity while offsetting the cost of owning your home. And when it’s time to sell, you’re not just listing another house: you’re selling a rental unit that has proven earning abilities. That could be a powerful factor in achieving a higher asking price.
It’s also worth considering the tax burden of selling your home, especially if the capital gains tax would be a significant expense. For property owners who are looking at long-term capital gains, consider how the capital gains tax rates would impact your bottom line when deciding to sell or rent an investment property. It might also be worth looking at Air BnB that keeps you in booming vacation rental real estate markets.
It’s a lot to consider. We always recommend consulting with tax and real estate professionals to make sure you’re fully educated about your options.
If you own a vacation home and would like to explore the possibilities, MJS Property Management is always helping homeowners buy and sell a rental property with confidence.