If You Can’t Sell, Why Not Rent Out Your House?
With rising interest rates, soaring inflation, and jitters over a potential recession, the real estate market has started cooling down. That means the heady days of sellers fetching way over asking price have ended, too. As an owner, trying to sell now may no longer make sense financially. But if you can’t sell, why not rent out your house?
Why Interest Rates Matter
Historically, 30-year mortgage rates mirror the interest rates of 10-year bonds. When the Federal Reserve announces an interest rate hike, it means they want to cool down inflation.
But this creates a double-edged sword. While increasing interest rates tends to cool inflation, it also increases the costs of household expenses. So, any interest hikes drain the purchasing power of would-be buyers.
For example, in 2021, 30-year mortgage rates hovered around 4%. By the end of 2022, they sat at 6-8%. A 30-year $300,000 mortgage in 2021 at 4% would have had a monthly payment of $1,432. At 6% in 2022, that same mortgage would cost nearly $1,800 a month. An 8% interest rate would mean a $2,200 monthly payment!
Factor in literally everything costing more from inflation and that once affordable house may suddenly be out of reach. Even if it’s still doable, news of mass layoffs and recessions may make purchasing a house feel too risky.
Supply and Demand
All this translates into less demand for real estate. If you have a house for sale now, you likely won’t get as much for it as in 2021. Maybe you waited too long to put your house on the market. Or maybe you had a change in your situation, but selling may no longer make sense.
However, here’s where renting out that same house can benefit you. When real estate sales go down, the rental market tends to uptick. Because if someone feels skittish about buying a house, renting is the next option. People have to live somewhere, right?
Landlord or Real Estate Investor
You may have never had an interest in becoming a landlord. Maybe the thought gives you nightmares of dealing with leaky toilets at 3 a.m. or chasing late rent checks. Finding the right balance on rent rates and ensuring a house meets rental codes can feel too much like rocket science.
That’s where having a reputable property management company can save the day. They already have experts who ensure a house meets code and they know which amenities renters look for.
They can help with advertising, screening candidates, signing contracts, collecting rent, and fielding all those 3 a.m. emergency calls. Some will offer the use of their handyman services for repairs or maintenance projects, too.
Now that drain on your budget MAKES you money and gains equity as the rent checks cover the mortgage payments. Even if you’ve never thought of yourself as an investor, you can easily become one using an asset you already have.
So, if you’re thinking about selling your house, talk to one of our specialists first to see if renting might make more sense. Contact our team at 321-236-6690 or use our online form to learn more.