EMBRY GROUP AT CRUE REALTY | SELLER'S GUIDE
Embry Group at Crue Realty | Huntsville, AL
Whether to sell or rent out your Huntsville home comes down to four questions: Will the rent cover your real costs with room to spare? How would renting affect your taxes? Do you need the equity for your next home? And do you actually want to be a landlord, possibly from another state? If the numbers are tight or you need the cash, selling is usually simpler. If the numbers work and you're ready for the responsibility, renting can make sense. Here's how to work through each question.
This comes up a lot with PCS moves and job relocations out of Huntsville. (Moving with the military? See [LINK: Choosing a Realtor for Your PCS].)
1. Run the Real Numbers, Not Just Rent Minus Mortgage
Start with what similar homes nearby actually rent for. Then subtract everything a landlord pays:
- Mortgage principal and interest
- Property taxes (which may go up; see below)
- Landlord insurance, which is different from a homeowners policy
- HOA dues, if any
- Property management, if you won't manage it yourself
- Repairs and maintenance
- Vacancy between tenants
- Turnover costs like cleaning, paint, and carpet
If what's left is thin or negative, one surprise repair can wipe out a year of profit.
2. Understand the Tax Side
Two tax issues often decide this. Talk with a tax professional before you choose.
The capital gains exclusion. Under federal tax law, if you've owned and lived in your home as your main home for at least two of the last five years before you sell, you may be able to exclude up to $250,000 of gain from income, or $500,000 if married filing jointly. Renting the home out starts that clock running. If you rent too long, you can lose the exclusion. (Service members may have extra flexibility; ask your tax pro.) See IRS Publication 523 for details.
Depreciation. Rental owners depreciate the home over time, and that depreciation can be taxed when you eventually sell.
Alabama property taxes. In Alabama, an owner-occupied home is assessed at a lower rate than a rental, and the homestead exemption applies only to your primary residence. Turning your home into a rental can noticeably raise your property tax bill. Check with the Madison County Revenue Commissioner (or your county) for your numbers.
3. Check Your Mortgage and Insurance
Most owner-occupied mortgages require you to live in the home for a period after buying, often a year. If you're past that, renting it out is usually fine, but let your lender know.
Call your insurance company, too. A standard homeowners policy typically won't cover a home you're renting to someone else.
4. Be Honest About Being a Landlord
Owning a rental is a part-time job. Tenants call when the AC dies in August. You'll handle screening, leases, rent collection, repairs, and occasionally a tenant who stops paying. Alabama has specific landlord-tenant laws you'll need to follow.
A property manager can take most of that off your plate, especially if you're moving out of state, but their fee comes out of your cash flow. If you decide to rent, our sister company, Venture Haven Property Management, manages rental homes across North Alabama. They handle marketing, tenant screening, maintenance, and owner reporting, so you're not fielding repair calls from another state. They also offer a free Investor Strategy Call to help you figure out whether renting makes sense for your home.
5. Think About Your Next Home
If you need your equity for a down payment on your next home, selling may be the only practical choice. If you don't, keeping the home could be part of a long-term investment plan, as long as the numbers in step 1 hold up.
You Can Rent Now and Sell Later, But Plan for It
Renting doesn't lock you in forever. Just remember that selling with a tenant in place has its own rules and timeline, and the clock on the capital gains exclusion keeps running while you rent.
Start With What Your Home Is Worth
The best first step is knowing what your home would sell for today, so you can compare that to what it would earn as a rental. Get a free home valuation and we'll help you weigh both options. Find out what your home is worth.
Ready to Make a Move?
The Embry Group at Crue Realty has helped hundreds of buyers, sellers, and investors navigate the North Alabama market. We're here to help you do the same.
Call or text: (256) 690-0340
Email: [email protected] | Website: embrygrouprealestate.com
Embry Group at Crue Realty | Huntsville, AL | (256) 690-0340 | [email protected]
