Should I Sell My Home or Keep It as a Rental? – Key Factors to Consider

If you’re a homeowner in Minnesota, and you’re contemplating a move, you may be faced with the decision of whether to sell your current home or keep it as a rental property. There are several factors to consider, including financial aspects, risk management, and tax implications.

  1. Affordability and Equity

The first question to ask yourself is whether you can afford to leave your equity in your current home or if you need that

money to purchase a new home. Evaluate your financial situation and determine if you have sufficient savings or other sources of funding for a down payment on a new property without selling your existing home. If you’re relying on the equity from the sa

le of your current home to fund your next purchase, keeping it as a rental might not be a feasible option.

  1. Mortgage Qualification

Another crucial consideration is whether you can qualify for a new mortgage if you keep your current home as a rental. Lenders often have stricter requirements for borrowers who are carrying multiple mortgages. You may need to demonstrate that you have enough income to cover both mortgage payments and other property-related expenses. Additionally, some lenders may require a certain amount of equity in the rental property or a history of rental income to approve your loan.

  1. Property Management

If you

decide to keep your home as a rental, you’ll need to address property management. Will you manage the rental property yourself, or will you hire a professional property management company? Managing a rental property can be time-consuming and may involve tasks such as advertising the property, screening tenants, collecting rent, handling maintenance issues, and dealing with legal matters. If you’re not prepared to take on these responsibilities or if the cost of hiring a property management company is prohibitive, selling your home may be the better option.

  1. Risk Tolerance

Operating a rental property comes with its share of risks. You’ll need to be prepared for potential property damage, vacancies, and the possibility of eviction. Additionally, rental properties can be subject to fluctuations in the real estate market, w

hich can impact rental rates and property values. Assess your risk tolerance and decide if you’re comfortable with the uncertainty that can come with owning a rental property.

  1. Tax Factors

Owning a rental property can have various tax implications. On the one hand, you may be able to deduct certain expenses related to the rental property, such as mortgage interest, property taxes, insurance, and maintenance costs. On the other han

d, you’ll need to report rental income on your tax return, which could increase your taxable income.

One significant tax factor to consider is capital gains. If you sell your home, you may be eligible for a capital gains exclusion if you meet certain requirements. However, if you convert your home to a rental property, you may lose this exclusion, and you’ll need to pay capital gains tax when you eventually sell the property. Consult a tax professional to understand the full implications of your decision.

  1. Local Real Estate Market Conditions

The sta

te of the real estate market in Minnesota can also influence your decision. If the market is strong, with rising home values and robust rental demand, keeping your home as a rental property might be a wise investment. On the other hand, if the market is stagnant or declining, selling your home and cashing out your equity might be th e better choice.

  1. Long-term Goals

Finally, consider your long-term financial and lifestyle goals. If you’re looking to build wealth through real estate investments, keeping your home as a rental property may align with your objectives. However, if you’re more focused on simplifying your life or reducing your financial obligations, selling your home might be the better option.


Deciding whether to sell your home or keep it as a rental property is a complex decision that depends on your personal circumstances, financial situation, and long-term goals. By considering factors such as affordability, mortgage qualification, property management, risk tolerance, tax implications, local market conditions, and your future objectives, you can make an informed decision that best suits your needs. Consulting with real estate and tax professionals can provide additional guidance and support as you navigate this important decision.