As a Massachusetts Realtor, I have repeatedly been asked whether I should rent my house out or sell it. Sometimes, the decision should be clear, but that isn’t always true.

Picture yourself in the following position.

Suddenly, you find out that a new position has opened within your company, and they are asking you to relocate your family to the other side of the country.

The job opportunity is too good to pass up, so you decide to take it. However, you realize that you will need to sell or rent your home with an impending move.

This scenario repeatedly occurs with Massachusetts homeowners. Many factors can influence your decision to sell or rent your home.

The low housing inventory has created a robust seller’s market, but it is essential to weigh this against the potential benefits of renting. Analyzing market conditions, including rental rates and home prices, can help homeowners decide.

I will cover what you should be thinking about to help make the best decision possible. I would first start by pondering these thoughts:

• Whether to sell or rent your house depends on personal circumstances, including immediate cash needs and future housing plans.
• Consider selling if you require the funds for your future home or anticipate a substantial profit.
• Renting it out could be beneficial if you’re seeking extra income or relocating temporarily with intentions of returning.

Should I Sell or Rent Out My Massachusetts House?

Understanding The Current Housing Market in Massachusetts

The U.S. housing market is experiencing a significant inventory crunch, with a shortage of 6.5 million single-family homes as of March 2024. Massachusetts mirrors what is happening in the national real estate landscape.

This imbalance between supply and demand is reshaping the landscape for buyers and renters. It makes it crucial for homeowners to evaluate the market conditions before deciding to sell or rent out their property.

Higher mortgage rates, currently in the high 6s, are also a significant factor to consider. These rates can influence potential buyers’ decisions and affect the affordability of purchasing a new home.

Homeowners contemplating selling should be aware that elevated mortgage rates might deter some buyers, potentially impacting the sale price and time on the market. However, the slight buyer decrease hasn’t significantly affected the fantastic seller’s market, which is unlikely to change this year.

Conversely, market conditions could increase demand for rental properties for those considering renting out their property. Renting out your house has been a lucrative option for several years.

It’s essential to stay informed about these trends. I always recommend speaking with a local real estate agent to make a decision that aligns with your financial goals and the market’s current trends.

Considerations for Renting or Selling a Massachusetts Home

Anyone considering selling a home in 2024 and buying in the last six or seven years should now have significant equity in their property.

The real estate market in Massachusetts has been very kind to sellers over the last several years. I have seen appreciation across the board like never before in my thirty-eight-year career.

The rapid rise in home prices has been unprecedented. When will it end? I don’t see home prices coming down anytime soon. However, this should be a consideration for anyone holding any asset.

You could have a substantial profit depending on how long you have owned your house and what you paid. Get a comparable market analysis completed with comparable sales to determine your home’s market value.

You could rent your property hoping the market will rise over the next several years or cash out while values are sky-high.

Your finances are always one of the first considerations when deciding between renting vs. selling your home.

Do You Need The Money to Buy Your Next Home?

If your ability to purchase a new house hinges on accessing the equity in your current home, then selling it is the most suitable choice. This allows you to utilize the proceeds from the sale towards your new down payment.

Purchasing a new home while selling your current one can be delicate. It is essential to hire a knowledgeable local real estate agent who can assist you throughout the transaction.

You can Take Advantage of Capital Gains Tax Laws.

It’s important to note that the capital gains exclusion on the sale of a primary residence can be a significant tax benefit for homeowners.

If you’re eligible, you can exclude up to $250,000 (or $500,000 for married couples filing jointly) of the capital gains from the sale of your home from your taxable income.

To qualify for this exclusion, the house must have been your primary residence for at least two of the last five years. This exclusion can provide substantial tax savings for individuals and couples who sell their property.

Where is the local Real Estate Market Headed?

When selling or renting your home, one consideration is to find out from a local real estate expert where they feel market values are headed, both in the near term and in the longer term.

A knowledgeable Realtor who has been in the business for a while should be able to help you determine what things look like, at least in the short term. I do this for my clients all the time.

Crystal balls are hard to come by in Real Estate. Those who are lucky enough to have one are often millionaires. Unfortunately, knowing exactly when the Real Estate market will turn downward requires one.

What is The Local Home Rental Market Like?

With rental demand skyrocketing in most areas of Massachusetts, homeowners might find renting their property more lucrative than selling.

Again, you should consult a local Realtor to determine how well the rental market performs. Has it performed as well as the Real Estate market, or is the demand for rental housing lower? Most rental markets in Massachusetts are flourishing, just like home sales.

Rents are up everywhere, making rental homes attractive. There is a good possibility there are folks who would like to rent a lovely home rather than commit to purchasing if they feel they could be transferred quickly or feel market values will come down and don’t want the risk.

Renting Can Be Wise If You’re Relocating Temporarily

A few of my clients have been moved across the country, but only briefly. In these circumstances, they have opted to keep their houses.

If your relocation is temporary and you intend to return to your current city or town, you might consider keeping your home and renting it out.

This can offer assurance and peace of mind, and when considering closing costs, it might even be more economical than selling and buying a new home in the future.

Your Rental House Becomes an Investment Property

Your Massachusetts Home Becomes an Investment Property.

Relocating homeowners need to remember that a rental home becomes an investment property. Owning a home as an investment property can potentially help or hurt you tax-wise. I would recommend consulting a tax professional for guidance.

Although you will be paying rent, you must remember that you will still have principal, interest, taxes, and insurance to pay. If the property is a condo, you would likely also pay the condominium fees. As a landlord, you must maintain the property and fix any issues.

Many landlords who have relocated out of state will also consider hiring a property manager. The typical charge for management services is 8-12% of the rent.

So, if you charge $2000 a month for rent, you can expect to pay a manager around $200 a month. Some excellent tax deductions for rental property could influence your decision-making.

Legal Considerations When Renting Out a Property

Becoming a landlord comes with legal obligations and responsibilities. It is crucial to understand these factors before renting your property.

They include ensuring the property meets safety standards, adhering to fair housing laws, and being prepared for the financial implications of maintenance and repairs.

Landlords must provide a safe living environment for their tenants. You must keep up with regular maintenance and prompt attention to any issues.

Additionally, understanding the legal framework in Massachusetts regarding tenant rights and eviction processes is essential.

The complexity of these responsibilities can be daunting. Over the years, many of my clients have been swayed not to rent their houses but to sell them.

Consulting with a real estate attorney can provide clarity. An excellent lawyer will help you navigate these legal waters more confidently.

Do You Want to Take on Landlord Responsibilities?

Understanding landlord responsibilities is crucial for homeowners considering renting out their property.

As a landlord, one of the 1st steps is choosing the right tenant. Over the years, I have seen a few occasions where the renter did not treat the home the same way an owner would.

The owner was left with paying to replace carpets and do a lot of painting. These costs can add up fast, so picking a responsible tenant becomes critical.

There are also considerations such as handling tenant complaints, maintenance issues, and even legal issues such as eviction.

Hiring a property management company can alleviate some of the burdens of being a landlord, but at a cost.

In the end, there is a lot to think about when deciding whether selling or renting your home makes the best fiscal and practical sense.

Tom Hernandez of the Hernandez Team provides helpful considerations from years of experience.

The dccision to rent out your house vs. selling it is not one that should be taken lightly. I have had a few clients that did not realize how challenging being a landlord can be. Getting the call at 2 a.m saying there is no heat in the house or there is water coming in the basement is never pleasant.

Owners should think about all the cons to renting before moving forward with a long term lease. It can be a stressful experience that you’ll regret doing.

Conclusion

The financial implications of selling versus renting are complex and depend on individual circumstances and market trends. It would be best to give this decision serious thought. Rushed choices lead to regrettable mistakes.