The Pros and Cons of Renting After You Sell Your Home

Wait for prices to cool before purchasing your next home

Property prices increase in a seller’s market as buyers compete for a limited selection of homes. That means if you sell your home in a seller’s market for a great price, you will probably pay a higher price for your next home.

If you rent before buying your next home, you can give yourself time to wait for real estate prices to fall. As the real estate adage goes, money is made on the purchase, not the sale.

This strategy is challenging since it’s almost impossible to predict the market’s trajectory. If the market stays in the seller’s favor, you could live in your rental years longer than expected, paying rent rather than building equity.

Avoid making an offer with a home sale contingency

Say you find the perfect house to buy before your current house sells and need your home sale money to purchase. In this situation, you must include a home sale contingency in your offer on the house you want to buy that states you will purchase the property if and when your home sells.

As you might expect, a home sale contingency significantly weakens your offer in the eyes of the seller. Unless you’re in a buyer’s market, you may struggle to secure your next home until you can remove this contingency from your offer.

Alternatively, you can sell your house and rent in the interim to make a contingency-free offer on your next dream home. Of course, you’ll need to consider your lease term when planning your purchase timeline to avoid paying fees or excess rent.

Skip the cost and hassle of home repairs

While renting has its drawbacks, it also has its perks. For example, as a renter, you’re rarely responsible for repairs and updates to the home, which are often time-consuming and pricey. Of course, what your landlord will and won’t repair depends on your lease.

Take more time to explore neighborhoods for your next home

If nothing else, renting after selling buys you more time to find your next home. It’s easy to rush into a home purchase in a seller’s market when inventory is limited, resulting in buyer’s remorse.

When you rent after you sell, you can take your time to decide what you want and where you want to buy while renting. You can rent in an area you’re interested in as a trial run before committing to purchasing property there.

If you’re considering renting after selling, you also need to consider the downsides. Here are a few drawbacks that might prevent you from signing a rental application after your home sale:

Moving twice is stressful and expensive

You’ll have to move twice if you make a pit stop at a rental before your next place. While you can store some things between moves, it will still require extra work and money.

The average cost of a local move for a 2-3 bedroom home is $1,250, while the average cost of a long-distance move (over 1,000 miles) is $4,890. Even if you’re moving locally, moving twice could range between $501 for a studio apartment to $2,988 and higher for a 4-5 bedroom house. It all depends on the size of your home and how many items you have to move.

Your rent goes into another owner’s pockets

The most glaring drawback of renting after selling is that you won’t build home equity. Instead of paying your mortgage, you’ll be paying rent, which you’ll never see a penny of again.

“It’s not your home, so you’re not making equity off of it. You’re paying somebody else’s mortgage,” Van Den Bosch says.

Of course, you must decide how important equity is to you and how long you feel comfortable renting.

Rent may cost as much as your former mortgage (or even more!)

In some parts of the country, rental prices may be similar to your mortgage or even higher.

You can use SmartAsset’s “Rent vs. Buy” calculator to help decide if you would be paying more or less in monthly costs for renting or buying. This tool considers your yearly income, current rental rate, and home price to help you decide whether to buy or rent.

There may be a rental shortage in your market

A seller’s market can cause rental shortages, meaning you would have fewer rentals from which to choose. Finding a rental can be tricky, even without a shortage.

NAR’s 2023 Member Profile reveals that the real estate professionals’ capacity to assist clients is affected as inventory has reached its lowest level since 1999.

It’s best to speak to your real estate agent about the market in your area before you put all your eggs in the rental basket.

Step one: Talk to an expert

Connect with a top-rated local real estate agent who can help you navigate rent-to-own options near you.

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It’s difficult to time the market to buy low

Selling high and buying low sounds like a win-win situation, but how do you ensure you buy low? You’ll have to time the market, which is more complicated than it may seem. Even experts can only predict so much about the future of the real estate market.

Overestimating your ability to time the market can lead to dire consequences. If prices stay high, you could end up in your rental longer than expected, taking more and more rent money out of your pocket — and possibly paying even more for your next home if you decide you can’t wait any longer to buy.

The decision to rent or buy after selling your home is highly personal. Consult a top real estate agent if you’re still on the fence. A top agent can help you understand the state of your hyperlocal real estate market and develop the best strategy for your situation.

To get matched with an agent perfect for you, consider HomeLight’s agent matching service. We’ll crunch transaction data and client reviews to pair you with three top real estate agents in your area.

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