Should I sell or rent out my first home?

There’s nothing like buying your first home. It’s one of the most rewarding experiences a person can have. Yet, when it’s time to say goodbye, knowing whether to rent or sell is a tough decision.

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Having a definitive answer to this question isn’t easy. Like any situation, it varies on a case-by-case basis.

You need to ask yourself questions such as:

  • How profitable is your first home?
  • Is there a rental market for your home?
  • What are your first home’s amenities?
  • Is there any chance of capital growth?
  • Have you considered taking on a second home loan?

It sounds like a lot, but we’re going to break down each one for you in the hopes to make your decision making easier.

Home Profitability (Cash Flow)

We can also call this cash flow, and it’s one of the key steps when deciding whether to rent or sell your first home.

If you decide to rent out your property, once all operating expenses are complete, will you bring in a profit per month (or annum) on your rental agreement with your tenant?

You can use a cash flow calculator to make a close estimate of this.

Perhaps you’ll find the repair expenses on top of miscellaneous costs become more than the total amount of rent you’ll receive per annum.

This creates a poor cash flow and therefore means in its current state, your first home isn’t profitable. In these situations, it may be best to sell instead and use your return on purchasing a new property.

However, if you’re in no rush to move out, you should consider increasing your cash flow.

The obvious way to do is to increase your rental cost, but other methods include:

  • Renting out parking spots
  • “Flipping” the property
  • Increasing the cost by allowing pets in the property
  • Helping to develop the land around the property

Of course, all of these are influenced by your home’s location.

Home Amenities

With that, another key factor is to look at home amenities. This can range from your home’s location to construction and even style. However, in this case, we’re going to focus on location. Ask yourself these questions:

  • Does your first home have a pleasant view?
  • Is your first home in a city, or in the countryside?
  • Are there schools nearby?

These will influence your aforementioned cash flow.

For example, if your first home is somewhere with an excellent view in the countryside, consider that buyers will want to buy your first home as a forever home rather than rent it, as opposed to an apartment near a popular business centre or school.

When looking to rent, some of the most popular amenities people look for are:

  • Pet-Friendly Units
  • Furnished Units
  • Good Parking
  • Strong Internet Access

If your property hits all of these marks, then renting out the property is liable to be a more popular option than selling. Meanwhile, home buyers moreover consider:

  • Location
  • Exterior Features
  • Interior space/appliances

Compare your first home’s amenities and ask yourself if someone is more likely to live in your home out of convenience, or because it is a place to fall in love with.

This will heavily influence whether or not you should sell or rent out your first home.

Capital Growth

You can describe capital growth as simply the increase in value over time.

When deciding whether to rent or sell your first home, calculate your average capital growth and the potential increase over the coming years.

For example, you might find in five years’ time, your capital growth will be more worthwhile than it is today. If so, and if your average cash flow from renting out your first home is profitable, then you should rent out your property for that five-year period before selling it on.

A simple way to calculate capital growth is to subtract your home’s market value from the value of the property today.

 However, to explore this further:

  1. Divide the value by how many years you’ve lived in your house
  2. Convert the result into a percentage.

This will give you your capital growth per annum. If your house price is increasing by, 10% per year as opposed to 30%, is it really worth holding out for a higher return?

Home Loan

If you’re not selling your first home, you may need to take another loan to buy a second home.

Lenders will look at the fact you’re already a homeowner when deciding, and may decline a second loan if your first home’s equity is low, or if the cash flow of it is poor.

Consider this: If you’re losing money every month with an unhealthy cash flow, why would lenders take a chance in granting a second loan?

With that in mind, when considering renting vs selling your first home, make sure your home has decent equity and is in an area with a good cash flow.

There are loans you can consider however if you’re set on renting out your first home, but don’t have good equity or cash flow.

A guarantor loan will involve asking a family member or friend to pay back your loan if you default on payments. If your guarantor is in a good situation, this is a key influence in lenders’ decision making.

Another type of home loan is a non-conforming loan. The rates of these loans are normally higher than standard loans, but if you’re certain you can handle it, it may be a good option to consider.

For more of an in-depth look at home loan, have a read of our blog ‘Different Types Of Home Loans Available In Australia’.

Calibre Real Estate Can Help

If you are on the lookout for an agent in North West Brisbane, you need to look no further.

We understand it can be difficult knowing whether to rent or sell your first home and while we’ve provided some valuable tips, you shouldn’t go at it alone.

We can take a look at your property, the area you live in, your own situation, and best advise you on your options moving forward.

Our expert team is fully-trained in knowing the market and the fluctuating cash flows within the industry.

Never worry about making an ill-informed decision or moving forward in a way you might regret again.

You can reach us today on 07 3367 3411.

191 Musgrave Road,
Red Hill QLD 4059

07 3367 3411