If you are moving across cities, going on a new adventure, giving a go at another job, or simply have an extra property, then you’ll have to sort out the status of your home. If you are constantly presented with the question “Should I sell my house or rent it out?” then we are here to help you.
The dilemma can often confuse homeowners and they usually do not end up making the right decisions. There are numerous factors that you need to consider while deciding the fate of your home. Moreover, there is no binary answer to this question because it will highly depend upon your circumstances.
To buy or sell; that is the question
Following are some of the aspects and facts that can help you decide whether you should sell or rent out your property.
Building wealth
One of the most enticing features of selling your investment property is that it will provide you with a huge capital. You can use it for many purposes. If you have other living arrangements you can then use the amount to invest into profitable ventures to stabilise your own financial situation.
Moreover, you can also opt for other options to enhance your living standard.
You can buy a much bigger house if your investment property is sold with a profit. Most Australians are now owners of massive houses due to this strategy. It is a proven and stereotypical way to help you climb higher on the ladders of social ranks.
Just remember, if you want to avoid Capital Gains Tax, you can only rent your house out after being owner occupied for a year.
Market trends
When you decide to sell or rent your home you need to understand the current situation of the market. Your investment property will only be beneficial to you if it provides you with some profit.
If the market value of your house is lower than the time you bought it then you should avoid selling it. If the resale value is higher and it can provide you the amount to either buy a bigger house or further invest, then you should sell it.
Also, you can consider seasonal changes like selling your home in spring, which has proven to have a higher success rate for sellers.
Pro tip: What not to do when selling your home? Know your property’s value and do your research dutifully.
Expenses
How much does it cost to sell a home? Before selling your house you need to take care of certain expenses. These include the capital gains tax, repair costs, listing price, and real estate agent commission. If you have lived in that home your whole life or any other family member has occupied it for a long time then you will be exempted from the capital gains tax.
If you have only used your home as an investment property then there will be a tax liability on you. Moreover, if the property investors rent out the home or use it as a source of income there will be tax implications and you will have to pay capital gains tax.
The tax is usually taken as a part of your income tax because you have used your property as an asset. Listing the house is another essential detail that you need to keep in mind. Most listings usually cost 1000 AUD or more.
You also need the amount to fund the marketing campaigns. Moreover, you need to provide a commission to the real estate agents too. The amount varies according to different states.
In Victoria, the commission rate is around 2% while in new south wales it exceeds up to 2.4%. Therefore before finalising your budget and the total costs for sale, you need to assess the laws of your state.
Mortgage payments
Another one of the reasons people sell their house is mortgage repayments. If you are behind on the mortgage payments and are unable to pay any further, then selling the house can be a good option.
The equity amount can help you match the investment loan payment and clear them off. You can keep the rest of the amount. Mortgage usually does not hinder your resale opportunity. Selling the house in such circumstances can significantly reduce your financial burdens.
Constant cash flow
If you are moving across the town for a new job or opportunity then renting can be a good option too. It can help you generate adequate cash flow. The potential rental income covers most of your expenses. It is also an incredible way to get hands-on passive income.
The rental market in Australia is booming with the influx of international students and expatriates. Therefore you won’t have to wait or spend your time and energy on marketing. There is a high chance that you will instantly find a tenant.
Rental arrangements
Preparing your rental property can be quite a hassle. You need to take care of the maintenance and upgrade and ensure that your house offers appealing amenities before you put it out on the market.
You must check all the bathrooms and kitchens to fix the water leakages. Repainting the hose in case of damage is necessary; making your rental property desirable for the tenants will grant you a lucrative rental income.
You will also have to assess whether you can meet all the operating costs before making such a decision. If you have a sound financial sense then you will also have to find a reliable insurance option, which will cover the costs for all the damages and maintenance to secure your finances after the tenant leaves.
People also ask
What kind of tax deductions will be implied when I sell my property?
If you sell a rented property then there will be tax deductions from your capital gains. The taxable income will also depend on the period you have owned the house for. If the Australian property investors have owned it for a year then there will be a partial exemption in the amount. Moreover, there is no land tax for an existing house.
What should my rental demand be?
The rental demand will eventually depend upon the size and amenities of your house. You must also consider the market trends and value of your house before making a demand.
Can I sell my house immediately after I purchase it?
Technically, you can sell your house immediately after purchasing it. However, you should also consider the cost difference between selling and buying the house, add that to the listing price, commission, insurance, and maintenance costs, and you might end up with a loss. Therefore, it is wiser to wait a few years before selling the house after purchasing it.
