Rental Property vs. Selling: How to Decide If You Should Rent or Sell Your Property

Life circumstances can create opportunities to move to a new city, relocate closer to family, shorten commutes, or upgrade to a dream home. When deciding whether to rent or sell your current home, there are many factors to consider. The most successful investment properties cover most of the property owner’s monthly expenses, provide responsible housing to the public, and mitigate risk with a thorough understanding of tenant-landlord law or hire a professional property management company to do this for them.  

Here are some questions to ask when weighing the pros and cons of becoming a landlord:

Do You Plan to Return?

If you are planning to return to the area either in the short term or in years to come, or if you just want flexibility to keep possession of your property, it may be better to rent. This is especially true if your mortgage is nearly paid off, or you refinanced when interest rates were low, and the property is well-maintained with little deferred maintenance. You can continue to increase equity while having qualified tenants cover the bulk of the monthly mortgage. Whenever you are ready to move back, you can work with your property management company to give the tenants plenty of notice to allow you to move back into the property when you are ready. 

Considering purchasing an investment property? Browse through these homes on the market in the Greater Sacramento region. 

Do You Have the Financial Capacity to be a Landlord?

If you are in a financial position to absorb 4 or more weeks of vacancy loss, which is typical in the Sacramento market, and you have the financial bandwidth to address maintenance issues as they arise to keep the property habitable, you may be in a position to rent your property. Even when future tenants are screened thoroughly, circumstances can change on a whim, and a well-qualified tenant can find themselves in a difficult situation after signing a lease. If you can float the mortgage and monthly expenses for at least three months, you will be in a good position to absorb the worst-case scenario as a landlord!

Can You Accept the Legal Liability of Being A Landlord? 

California is an extremely tenant-friendly state with many laws that govern tenant-landlord relationships. The most commonly-violated laws by landlords occur before a lease is even signed, during the application process. It is very important to establish clear, written rental criteria before renting out your property. California Fair Housing law is constantly evolving and restricts what a property owner can and cannot say or do during the screening process. Post-COVID, California property owners are now required to accept Section 8 housing vouchers, regardless of whether or not the property owner wants to participate in the program. Similarly, there are a plethora of required disclosures, pamphlets, and notices that need to legally be provided to all tenants at the start of a lease and on an annual basis thereafter. If you have the capacity to take on the responsibility of risk management, including becoming privy to all of the laws and regulations that govern housing locally, statewide, and federally – or, if you have the cash flow to allow the hiring of a professional property management company to do this for you, you may be in a good position to rent out your property. 

Is Your Property Safe for Residential Rental Use?

The leaky faucet that started five years ago, the roof shingles that fall during every bad winter storm, and the never-been-pruned tree that towers over the living room may not bother you as a homeowner, but chances are, they are going to need to be dealt with before your rent out your home. The Department of Housing and Urban Development (HUD) has its own definition of what is considered habitable housing legally worthy of collecting monthly rent, but in addition, the City and County of Sacramento – as well as many other local municipalities – have their own Rental Housing Inspection Programs that govern rental housing in our area. These city and county inspectors are trained to seek any potential building violations related to safety and habitability of the property and demand that most of the violations be cured in 30 days. Additionally, tenants who report maintenance issues but do not have adequate resolution from the property owner can contact local code enforcement, prompting an entire property inspection. While these inspections seem onerous, the goal of these programs is to prevent slumlords from collecting rents on a property that is not fit for habitation, which unfortunately, does happen. If you are willing and able to keep your property well-maintained, that can go a long way in retaining equity, creating a positive relationship with your tenant, and keeping off of city inspectors’ radar. 

 Are You Willing to Give and Take?

While there are many black-and-white laws that are applicable to rental housing, there is also a lot of gray area. For example, it may make sense to raise rents annually at lease renewal to ensure that you are maximizing your rental income and keeping up with current market rates. However, a tenant may request certain upgrades – such as newer appliances if the current appliances are dated, or annual carpet cleaning to keep flooring in good condition, etc. – as their rents continue to rise. Or, maybe the tenant is a dream and pays rent on time, takes excellent care of the property, and promptly notifies you of maintenance issues as they arise, but two years into the lease, they ask if they can have approval to move in a large dog. Are you willing to give and take? If so, you may make an excellent landlord!

Do You Treat the Security Deposit as Income?

It is typical for a property owner to collect one month’s rent as a security deposit. However, the deposit is not considered income to a property owner; it is the tenant’s money that is only to be used in the case of non-payment of rent or if there are clear tenant-caused damages beyond normal wear and tear. Keep in mind that while the law states a property owner cannot deduct ordinary wear and tear from a tenant’s security deposit, the law does not clearly define what normal wear and tear actually is. And remember – California is an extremely tenant-friendly state. Keeping thorough records and not getting into a habit of not nickel-and-diming in between each tenancy are two cornerstones of responsible housing providers. 

When weighing out your options to sell or rent your property, it is important to make the best business decision for your circumstances. Many times, if a property owner is holding onto a property for purely sentimental reasons or if the property owner is hesitantly deciding to rent because the property will not sell for a desired price, it becomes a poor business decision to transition the property into an investment. On the other hand, if you can cover most of your monthly expenses with rental income, comply with tenant-landlord law, and treat the tenant as an integral part of your investment, you can enjoy the benefits of long-term equity and continue to build your real estate portfolio for years to come. 

For more information on property management, you can visit www.windermerecapm.com or contact your local Windermere Real Estate Agent.

About the Author: Ashley Andreoni-Romo | Director of Property Management

Ashley Andreoni-Romo joined Windermere Property Management in 2016 and brings more than a decade of experience in multifamily and residential property management. Today, she leads one of the region’s largest property management teams, overseeing more than 1,500 doors and a team of 30 property management professionals while supporting more than 800 Windermere agents and their clients.

Ashley specializes in property operations, financial performance and strategies that help owners protect and maximize the value of their real estate investments. She holds the California Certified Residential Manager designation from the California Apartment Association and is an active member of the NARPM Women’s Council.

About Windermere Signature Property Management

Serving the Greater Sacramento region for more than 30 years, Windermere Signature Property Management provides full-service property management backed by deep local expertise and a commitment to exceptional service for both property owners and residents.

Originally established as Lyon Property Management, the company joined the Windermere Real Estate network in 2020 and officially became Windermere Signature Property Management in 2024. While the name has evolved, the experienced local team and commitment to clients remain the same.

Today, Windermere Signature Property Management combines decades of market knowledge with professional management, ongoing education and personalized service to help property owners protect their investments while creating a positive experience for residents.