For many people, owning a house is the ultimate sign of success and stability. Or rather, that used to be the traditional mindset. With the rapidly changing rental market and housing market trends, various homeowners either plan to sell their house and move to a rental apartment or they keep it as an asset.

Why Selling Your Home Can Be a Wise Decision

This reasoning is not illogical; after all, it is mainly a seller’s market. Fierce buyer competition is driving up home prices, with houses selling for way above their asking price. If the financial situation of a homeowner cannot keep up with the rising mortgage rates or property taxes, it makes more sense to sell your home at a higher price now and wait until the market cools down.

Should I Sell My House and Rent an Apartment?

Generally speaking, there are pros and cons to the decision of renting real estate and selling your current house.

Wondering whether you should take the plunge and sell your own home? Every situation and timeline is different.

We will tell you the reasons for not selling your home, and then the reasons to sell your home:

Reasons for NOT Selling Your Home

We do recommend that you seek advice from a financial planner or anyone experienced in the real estate market. However, your own research is also necessary in this matter. Let’s start by looking at the factors against selling your home and buying one later on:

1. The Housing Market is Tricky

It might be tempting to act now and take advantage of the seller’s market in real estate right now. You might be especially inclined to go for a home sale if there is a cash buyer available and the mortgage rates are getting out of control.

How long until the market cools down?

With the rising mortgage rates, renting makes sense in some situations. However, there have been many people who waited this past decade to go house hunting. Their hopes were that once the market cools down, they would be able to get better prices on a house. Today, these prospective buyers are facing even higher prices and probably regretting their past decisions.

Would it help to call in an expert?

While it might be useful to contact an expert, even a certified financial planner or real estate agent won’t be able to predict the future. In 2018, several real estate experts opined that home sellers might see lower demand in the future. This will force prices to come down then, so it was better to rent at that point.

Fast forward a few years, and we can see that real estate is still very much a seller’s market. Home costs are steadily rising, as are interest rates, mortgage payments rates (sometimes), and closing costs.

The risks of renting after selling your home

If you do decide to rent while waiting for housing prices to go down, here are the basic risks to consider:

• You might be spending a lot on rent, essentially paying off someone else’s mortgage
• You may find that real estate is even more expensive in a few years than the present time
• You don’t have home equity to rely on
• The rental cost might be higher than current mortgage rates

2. Mortgage Rates May Go Up and Down

Mortgage rates have an important role in cooling the real estate market. If these rates go down, they will increase the demand for housing. However, the same mortgage rates will not necessarily be good if you want to finance a new house.

By renting for a couple of years, potential homeowners might miss out on low-rate home loans. The difference could run into the thousands, so it is a major loss if that happens.

3. Sellers Have More Power When They Have a Home

While you may have the upper hand when selling your home, you won’t be a seller after that. After renting for some years, you will be on the other side in the competitive real estate market. Any real estate agent will tell you that buying another home will be a challenge, especially if you want to do it soon. However, there are ways to take advantage of the seller’s position while you have it.

The seller rent back

An increasingly popular tactic in the market right now is the seller rent back or post-occupancy lease. This allows the sellers to go on living in the home they have sold, giving them some time to find a budget-friendly new home. That way, they would be paying rent on the home from the buyers. The time period here could be some weeks or even months.

4. Is Rental Living Suitable for You?

For many reasons, several people might feel like renting an apartment is better than owning a home. However, others might be used to living in their own home and keeping pets, hanging wall decor, and doing whatever they want in their living space. For the latter group, it might feel restrictive and depressing to be confined to a smaller space, such as 1-bedroom apartments for rent in Farmington Hills, MI, with several daily rules to follow.

Of course, there are apartments in Farmington Hills, MI where the policies may not tie you down so much. If you are a pet owner, do research on how to find apartments that allow dogs and cats, in addition to other animals.

Situations to face in a rented space

Here are just a few situations which might make apartment living easier or more difficult than being in your own house:

• While you may not be responsible for necessary repairs in a rented apartment, a slow property manager can get on your nerves
• You may have the option of living in one of the best neighborhoods in Farmington Hills, MI, for example; however, the usual year-long lease will also tie you to a space without much flexibility
• Even if you sign a month-to-month lease, you are at the risk of having only a 60-day notice in case the landlord wants to sell or rent to someone else

Reasons Why You SHOULD Sell and Rent

We now come to the reasons in favor of selling your home and living in a rented space for some time:

1. Depends on Your Timeline

If you are not sure of your future plans, renting is one of the safest options. With home prices appreciating, having a house at this time could make you owe more than the actual worth in case the market cools.

If you are expecting to move around because of your job or career, it is best not to settle for a house in one place. With a rented space, you at least have more wiggle room.

If you plan to retire soon, want to try for higher education, or are just generally not ready to settle down, staying flexible is always an option. At times, you just don’t have the time to deal with property taxes, upkeep, maintenance, repairs, homeowners insurance, and sundry other affairs.

2. Short-Term Investments Will Not Justify Closing Costs

The closing fees during the process of purchasing a home include the following:

• Title insurance
• Appraisal costs
• Inspection costs
• Deed recording costs
• Mortgage origination costs

There may also be more costs depending on your location and unique situation. In total, these can add up to 5%-7% of the overall purchase price. That can be quite a hefty amount, even without the transfer taxes or realtor commissions.

Renting will help to hold home equity

If you are planning on moving within two years or thereabouts, it makes more sense to rent an apartment. The general rule of thumb is that new homeowners should plan on staying in their new house for a minimum of five years to cover their closing fees alone.

The home equity might even give them a profit this way. For shorter periods, it is better to rent a house and plan to buy in the future.

3. You Have an Advantage as a Cash Buyer

If you are planning on buying in cash, you won’t have to worry about increasing mortgage rates. This way, you can plan on buying a home in the future after renting for some years. The mortgage rates will not force you to settle for a smaller house in the future.

When mortgage rates are high, experts will usually advise becoming a cash buyer if possible. The rates going up mean that an individual’s buying power decreases.

4. You Free Up Your Capital

Selling your home will enable you to tap into that home equity and also get you some solid capital in hand. You can then invest this capital in something else and continue to gain benefits.

This step could be ideal for someone who is retiring and wants to travel. It could also be a lifesaver for anyone who needs capital for a specific important purpose, such as starting a business or pursuing higher education.

The Question of “When” to Sell

With the fluctuating market conditions and your own personal goals, you might be wondering whether to sell and get the best price possible. Here are some instances in which this might be the most logical choice for you:

Your Work Constantly Moves You About

If you are in an exciting and dynamic stage in your career, chances are that your traveling is at an all-time high mode. If you are frequently out of town, it does not make much sense to have a home of your own without a family to hold down the fort.

The same goes for those who get new assignments for a couple of years, and then move on to the next one. If you have your own home, insisting on keeping it might not be the best idea. The hassle of selling it quickly will make you lose out on some of the equity.

You are Facing Financial Issues

If you are not doing well financially, you don’t have to keep struggling with those mortgage payments. Sell your home, rent an apartment, and take some burden off your pocket. Incidentally, downsizing to an apartment will also help you declutter your items and can improve your quality of life.

While this might be a drastic measure, there is no denying that owning a home is a constant financial drain. If you do not want the long-lasting effect of a bad credit score, such decisions are in your best interest.

Dealing with Changes

Relationships change, families increase, children grow up and fly the nest. These are some examples of how life can change in just a few years. You could be in the middle of such changes and plan to move away soon. In such cases, selling your current home and renting for a while may be the best new start in life.

At times, it is fine to require a change in life even if there are no external factors forcing you to move. Perhaps, you have worked or studied very hard for several years; and now it is time to enjoy your gains? Or you are burnt out and need a major change in your lifestyle. Whatever the case, selling your home and renting somewhere new can help in beginning new chapters.

The Takeaway

Some people may want to be flexible and are willing to take a few risks to achieve a certain lifestyle, while others play things a little safer. When you stick it out in one home, chances are that you would be building a decent amount of equity. However, you’d also be losing out on mobility, higher profits in the future, and other factors.

At the end of the day, the choice is yours. What are your plans for the future and how can your real estate play a part? Take your time, think about it, and make the best decision at this point in your life!