Sell or Lease

"To Sell or to Lease? That is the question..."

Why lease rather than sell your house?

Because it is economically sensible to do so. Here are five considerations:

The most difficult part of investing in real estate is asset acquisition. It is expensive in terms of both time and money. So if you own a house, you have already accomplished the tough part. The other part of it is simply managing the asset. If you have neither time nor the inclination to manage, you can hire this part out to a professional property management company.
You will enjoy the short-term tax benefits of depreciation and operating expense deductions.
You will probably enjoy a little positive cash flow in the early-years and perhaps a substantial cash flow in the out-years.
You will enjoy the long-term benefits of property value appreciation.
Throughout the investment holding period your value is protected and you can draw against it with a home equity line of credit if necessary. Over the past 200 plus years real estate has proven to be the most secure form of investment in the United States.

Why sell rather than lease your house?

Because it is economically essential to do so. Here are four scenarios that support selling:

You are in a situation where you must purchase another home and you do not have the financial standing to either pay all cash, or to financially qualify for a purchase money mortgage. In this case, the cash assets from the sale of your home may be necessary to make the down payment.*
You have lost your source of income. Consequently, due to your inability to pay the mortgage, retaining the property would threaten your credit standing.
You are either approaching retirement or already retired, and wish to enjoy the fruits of your labor. In this case you are no longer interested in portfolio growth.
You have discovered a better investment opportunity for your cash.

*Note: There is an alternative for obtaining down-payment cash so that you can keep the asset as a rental. If you have substantial equity in the home, and interest rates are favorable, you may be able to do a cash out re-finance. You might also be able to obtain a home equity line of credit; if the combined payments on the first mortgage and the line of credit do not severely, negatively impact the cash flow on the rental.