Should I sell or rent out my house?

The Four Most Important Questions to Consider When Deciding Between Renting and Selling

Whether a homeowner should sell or rent out their home is always a matter of careful consideration. It makes sense to develop a long-term plan early on regarding how and when the assets tied up in the property should be used or released. Homeowners should ask themselves the following questions.

Is it worth selling, or can I benefit from rising real estate prices?

Housing prices in Switzerland have risen significantly over many years. High real estate prices can make selling an attractive option, especially if owners wish to realize a large portion of the real estate wealth they have accumulated. However, there is no guarantee that prices will continue to rise. At the same time, the local situation in the rental market should also be taken into account.

Another factor to consider is the condition of the property. Older homes, in particular, may soon require significant investments in the heating system, building envelope, kitchen, bathroom, or other structural components. These costs should be taken into account both when planning to rent out the property and when determining the optimal time to sell.

A professional evaluation and assessment of the local sales and rental market help to realistically compare the various scenarios.

Do I want to keep the house or apartment in the family?

When it comes to an inherited home or a long-standing family residence, financial considerations are often not the only factor at play. Perhaps you want your own children to use the property in the future, or you want the property to remain in the family for the long term. Renting out the property keeps these options open.

On the other hand, a large portion of the assets remains tied up in real estate. This can limit financial flexibility. In the case of a community of heirs, another question arises: Do all the heirs share the same goals? If one person wants to sell while another wants to keep the property, it’s important to determine as early as possible which solution is acceptable to everyone involved.

Would I rather have a steady stream of rental income or receive a large lump sum from the sale?

A sale, on the other hand, frees up a large portion of the capital tied up in the property all at once. The money can then be used as the owner sees fit. However, owners should also take into account the costs associated with selling a property.

Renting out a property generates a steady income and can thus serve as an additional source of income or help cover the costs of another property or your own mortgage.

However, it is important to note: The agreed-upon monthly rent does not correspond to the actual return on investment. Among other things, costs for maintenance, management, financing, and potential vacancies must be deducted from the rental income. These costs, in particular, are often underestimated.

For older properties, you should also factor in provisions for renovations and major replacement investments. These can significantly reduce the actual return on investment.

A simplified example involving a property worth CHF 1,000,000:

The rental generates net rental income of CHF 26,000 per year, which corresponds to a net return of 2.6 percent. In addition, the property remains in your ownership and can continue to appreciate in value.

Upon sale, net proceeds of CHF 950,000 can be realized after deducting incidental selling expenses. The capital is immediately available and can be used, for example, to purchase a new property or invested elsewhere.

The sale is more financially worthwhile if an alternative investment offers a higher return than 2.6 percent plus the expected appreciation in the property's value.

Professional advice can help you realistically analyze various scenarios.

Do I want to take on the hassle of renting it out?

A sale is a time-limited process. Once the property has been transferred, the owner’s responsibility generally ends.

When a property is rented out, the responsibility remains, and owners must handle administrative and organizational tasks.

These include, for example:

• Searching for and Selecting Suitable Tenants

• Viewings and Lease Agreements

• Communication with Tenants

• Organizing Repairs and Maintenance Work

• Replacement of Defective Devices

• Billing and Administrative Tasks

Anyone who chooses to manage the property themselves will therefore need sufficient time and a great deal of expertise. Alternatively, an external management company can be hired to handle these tasks. However, this incurs additional costs. Before making a decision, owners should therefore determine how much time and effort they are willing to invest in the long term and what costs they need to budget for professional property management.

Selling or Renting a House: Pros and Cons

Taxes on the Sale and Rental of Real Estate

Taxes can have a significant impact on which option is more financially attractive. Therefore, the tax implications of both selling and renting should be considered early on.

When selling a property, a capital gains tax may apply. In general, the capital gain realized is subject to tax. The specific method of calculating the tax varies by canton.

When renting out a property, the rental income received is considered taxable income. At the same time, certain maintenance and management costs can be claimed as tax deductions.

Which expenses are actually deductible and how high the tax burden will be depend, among other things, on the canton, the financing, your personal tax situation, and the property.

Especially when dealing with larger assets, multiple properties, or more complex financing arrangements, it may therefore be wise to have a professional assess the individual tax implications.

When deciding between selling and renting, there are many factors to consider

There is no one-size-fits-all answer to whether it makes more sense to sell or rent a house. Instead of focusing solely on current price trends, it’s worth starting with your own long-term strategy: What financial goals should the property help you achieve? How might your personal circumstances change? When, if at all, do you need the tied-up capital to become available?

Homeowners should therefore not simply compare the sale price and gross rent. It is more meaningful to consider the long-term net effects of both options. A professional real estate appraisal and an analysis of the local sales and rental market conditions provide a solid foundation for this decision.

Sell Successfully – with Engel & Völkers

A professional real estate appraisal is an important step toward a successful sale. It provides clarity on the price the property could command in the current market and thus also serves as an important basis for comparing selling versus renting.

In addition to the appraisal, at Engel & Völkers you’ll benefit from comprehensive market knowledge, specialized tools, and an international network of pre-qualified prospective buyers.

Sell Successfully Now

We’d be happy to assist you with the sale of your property. Please contact us—we look forward to hearing from you.