Why Selling a House Instead of Renting It Out Is My Biggest Financial Regret

Years ago, the house I rented in an inexpensive neighborhood went up for sale. I knew the owners previously had a difficult time trying to sell the house, so I quickly contacted my real estate agent and put in an offer.

The owners wanted a quick and easy sale, which meant I got a pretty good deal on the house. This allowed me and my family to stay where we were already and resulted in our monthly mortgage payment being about $400 less than our rent had been.

The house wasn't old, but it needed some updating. I figured I could make a few cosmetic changes and sell it soon after for a profit. My plan worked out, but I think it worked too well.

Simple changes to add value

I installed new flooring in the kitchen and in one of the bathrooms. I also did an inexpensive update to the kitchen and bathroom countertops, making them look much better. I painted the entire inside of the house, stained the decking, added a small floating deck in the backyard, and replaced some ugly bushes with flowers.

All together, I spent several thousand dollars updating the home, and saved money on the repair work by doing most of it myself. After I was all finished, we sold the house two years after buying it for a profit of about $20,000.

I'm not going to complain about making some money from the sale, but had I held onto the house and rented it out instead of selling, I could have made a lot more money from the home.

What I'd do differently

When housing and rent prices skyrocketed during the early days of the COVID-19 pandemic, the value of homes in my old neighborhood also jumped.

Last year, the person I sold my home to sold it for 33% more than they paid. Had I held onto the home myself for a few more years, I would have made significantly more money. Of course, I couldn't have anticipated the huge housing demand increase over the past few years, but seeing the big change does sting a little.

And my decision to sell looks even worse when I look at current rental prices. Currently, comparable rental homes in my old neighborhood are listed for 100% higher than my monthly mortgage payment. If I had rented out my old house, I would have easily been able to afford the mortgage, paid a property management company to take care of it, and still made hundreds of dollars in profit each month.

The two financial lessons I learned

I'm not kicking myself too hard for my mistake of selling the house instead of renting it out. But I did learn two important lessons from this experience.

First, I'll likely hold onto any property I buy in the future for a very long time. The next time I buy a house, I'll probably rent it out when I decide to move. I don't want to miss out again on the potential gains from holding onto real estate over the long term.

And second, I'll be more open to a little risk. I had a previous bad experience being a landlord, which made me think doing it again would be a mistake. While there are challenges to renting out a property, they probably would have been worth the annoyance had I held onto my old home.

None of us make it through our lives without making financial mistakes. It's not worth dwelling on them for too long, but it's definitely worth reflecting on the missteps so we can do better next time. Now, if you'll excuse me, I'm going to take a quick look at cheap properties on Zillow.