You’re moving up to a bigger home, and you’re not sure what to do with the old one. If you’re like many of our clients, you might be asking: Should I sell or rent my house?
And if you listen to a number of real estate podcasts (and friends of friends or so-and-so’s cousin) you might feel like the answer is hang on to that house!
After all, getting rich is all about earning passive income and nothing provides passive income like real estate.
Right?
We don’t think it’s that simple, and according to our guest today – a professional property manager – there is a lot that many people miss when it comes to managing a rental property to earn rental income.
Should I Rent or Sell My House? The Short Answer
Rent your house if the market rent covers your costs, you plan to hold it for 10 years or more, and you either have time to manage it or a property manager you trust.
Sell if you’d only rent for a year or two, the rent won’t cover your mortgage, taxes, and reserves, or being a landlord doesn’t fit your life.
Now let’s dig into the details to help you determine how to tell which side of that line you’re on.
Before Answering the Rent or Sell Question, Understand the Reality of Being a Landlord
To get the unfiltered version of what it’s like to step into the role of landlord, Eric sat down with Peter Cook, president of Annapolis Property Services. Peter has spent 25 years in property management, his company now manages about 680 homes, and he owns rentals himself.
About 90% of the property owners he contracts with come to him after deciding to keep what used to be their primary home as a rental property when they were ready to move on, so he has a depth of experience with the accidental landlord, too.
In this episode, he and Eric dig into a real, unfiltered breakdown of what it means to be a landlord. Not the theoretical version from a book or a podcast that romanticizes rental income as the best way to riches.
Peter shares the operational reality of tenant screening, rent pricing, vacancy costs, maintenance reserves, and the relationship dynamics that determine whether your investment is a wealth-builder or a financial headache.
If you already own a property and you’re wondering whether to rent it or sell it (especially if you’re moving up to a bigger home but aren’t ready to let go of your first place) this conversation is for you.
You’ll hear:
- Why your mortgage rate is completely irrelevant to what rent you can charge
- How to think about vacancy as a true financial cost (not just an inconvenience)
- The one-year lease rule that protects both landlords and tenants
- An insider tool almost no one uses: the tenant handbook.
Peter also breaks down the specific criteria good property managers use to screen tenants, the math on maintenance reserves, and how to actually find a trustworthy property manager if you’re not going to do it yourself.
Real estate can absolutely be a strong long-term wealth-building strategy for high earners, but it’s not for everyone and works best when you go in with both eyes wide open to the realities. This episode gives you the financial framework and the practical details to make that call clearly.
Peter is the President of Annapolis Property Services. Originally from Wales, Peter moved to Annapolis in 1999 as the General Manager of Sunsail Sailing Vacations. In 2003, after recognizing the need for long-term residential property management in and around the Annapolis area, he founded Annapolis Property Services. Peter is a licensed Real Estate agent, a member of NARPM (National Association of Residential Property Managers) and a graduate of Southampton University. In his spare time he enjoys sailing, Adventure motorcycling, snowboarding and spending time with his family and friends.
Resources mentioned:
- PropertyManagement.com: Directory of vetted property management companies searchable by zip code
- NARPM.org: National Association of Residential Property Managers
Key Takeaways: What We’re Thinking About
- Renting only makes sense as a long game. If you’d rent for one or two years and then sell, the effort and risk rarely pay off. Think 10+ years.
- Your mortgage has nothing to do with the rent you can charge. The market sets rent. Check what similar homes nearby are listed for.
- Vacancy is the real profit killer. Holding out for an extra $100 a month on a $3,000 rental, then sitting empty for four weeks, leaves you about $1,800 behind for the year.
- Budget one month’s rent per year for maintenance. That covers routine repairs, not a new roof or HVAC system.
- Expect about one month of vacancy every three years and keep at least one month of rent in reserve.
- Write down your tenant screening criteria and apply them to everyone. Consistency protects you legally and financially.
- Stick with one-year leases. You can always renew. You can’t easily get out of a three-year lease that’s gone sideways.
- Manage from a tenant handbook, not the lease. Nobody reads the lease until something goes wrong.
- Do it all yourself or hand it all off. If you hire help, skip placement-only arrangements and find a manager you trust.
When Renting Your House Makes Sense
Peter describes a very specific person as the “perfect investor,” and it’s probably someone you know. You bought a condo or townhome early in your career, often before kids. You’ve owned it for about five years. It’s appreciated, you locked in a reasonable mortgage rate, and now you’re moving up to a bigger place in the same area.
That setup has a lot going for it. You’ve built equity, the rent likely covers your holding costs, and you know the property and the neighborhood inside and out. A home you were happy living in tends to attract tenants a lot like you.
Peter adds one rule he uses for his own rentals: never buy (or keep) a home you wouldn’t want to live in at some stage of your life. He owns two condos he wouldn’t live in today, but he would have at 23 and might again at 65.
Signs renting could work for you
- The market rent covers your mortgage, taxes, insurance, and reserves.
- You plan to hold the property for 10 years or more.
- You have a cash cushion of at least one month’s rent.
- You have the time to manage it, or you’ve found a property manager you trust.
- You’d be comfortable living there again at some point.
Signs selling is probably the better call
- You’d only rent it for a year or two before selling.
- You bought recently at today’s higher rates and the rent won’t cover your costs.
- You don’t want to manage it and can’t find a manager you trust.
- You’d need this month’s rent to pay this month’s mortgage.
That last point matters more than people expect. In Annapolis, Peter sees $500,000 homes that rent for about $2,800 a month while the owner’s mortgage, taxes, and insurance run around $3,600. That’s roughly $800 a month out of pocket before a single repair.
Run the Numbers for Your Situation Before Deciding
Whether to rent or sell your house comes down to cash flow you can actually count on. Here’s how Peter thinks about each piece.
How much rent can you charge?
Whatever similar homes in your area rent for. Not what your mortgage is, and not what you’d like to earn. Peter hears “my mortgage is $3,000, so I need $3,000” all the time. The market doesn’t care. It cuts the other way, too: if your mortgage is $1,500 and the market will pay $2,500, take the $2,500.
To find your number, put yourself in a renter’s shoes. Search for homes like yours (same bedrooms, baths, and neighborhood) and see what they’re listed for. Zillow’s rent estimates are a starting point, but take them with a grain of salt.
For his own properties, Peter prices $50 to $100 below market. The home rents faster and he gets to choose from more qualified applicants.
Why vacancy costs more than a lower rent
Say you hold out for an extra $100 a month on a $3,000 rental. That’s $1,200 more a year. If it costs you four extra weeks of vacancy, you’ve given up about $3,000 to gain $1,200. You’re roughly $1,800 behind.
Vacancy also happens between tenants, no matter how well you price. Peter’s tenants stay about three years on average, with around four weeks between them to prep the home. Over 10 years, plan on about three months of vacancy. Keep at least one month of rent in reserve, too, so a late payment or empty month doesn’t make you late on your mortgage.
How much to budget for rental maintenance
Plan on one month’s rent per year, or about 8% of rent. On a $2,000-a-month rental, that’s roughly $2,000 a year, or $20,000 over 10 years. That covers appliances, paint, carpet, fences, decks, and the small stuff. It doesn’t cover a new roof or HVAC system, so budget for those separately.
The number is higher than the 1% to 2% many homeowners use because tenants aren’t always handy, and sometimes you don’t want them to be. Peter’s example: you could make tenants clean the gutters, but do you really want someone on a ladder on your roof to save $90? You can bring this cost down if you’re willing to fix the toilet flapper yourself on a Saturday morning.
Your cash flow at a glance
| Line item | Rule of thumb | Example on a $3,000/month rental |
|---|---|---|
| Rent | Market comparables, priced slightly under | $36,000/year |
| Maintenance | One month’s rent per year | $3,000/year |
| Vacancy | About one month every three years | About $1,000/year |
| Cash reserve | At least one month’s rent, held separately | $3,000 set aside |
| Mortgage, taxes, insurance | Your actual costs | Varies |
| Big systems (roof, HVAC) | Budget separately | Varies |
The tax side of being a landlord
Rental property comes with real tax benefits. Your expenses are deductible against rental income, so $100 of repairs costs closer to $70 if you’re in a 30% bracket. You can also depreciate the building (not the land) over 27.5 years, even while the property is likely appreciating.
There are catches worth knowing, especially for high earners:
- Depreciation comes back when you sell. It lowers your cost basis, and the IRS recaptures it at sale.
- Rental losses may not offset your paycheck. If your income is above $150,000, you generally can’t deduct rental losses against your salary. They carry forward until you have rental income or sell.
- Waiting too long can cost you the home sale exclusion. If you lived in the home for at least two of the last five years, you can exclude up to $250,000 of gain ($500,000 if married filing jointly) when you sell. Rent it for more than about three years and you lose that window.
That last one is a big deal in the rent-or-sell decision. If you’ve got significant gains, run the numbers with your advisor and CPA before you sign a lease.
Being a Landlord is NOT Passive Income
If you rent your house, someone has to manage it. Either that’s you, or it’s someone you pay. Tenants don’t just mail a check every month and never call. And as Peter puts it, nothing ever breaks at a convenient time. It’s the evening or the weekend, usually when you’ve got something big planned.
Here’s what the job actually involves.
How to screen tenants
Good tenants make everything easier. Bad ones make it brutal. Peter’s firm uses the same written criteria for every applicant:
- Minimum 600 credit score
- Verified rental or mortgage history
- Credit, criminal, and employment background checks
- Income of at least three times the monthly rent
If you’re doing this yourself, write your criteria down, make sure they’re legal in your state, and apply them to everyone. Don’t bend because you like someone or they have a sympathetic story. And know the rules: you can restrict pets, but you can’t say “no kids.” (Peter jokes that his kids do far more damage than his dogs.)
Why one-year leases work best
Peter compares a new lease to dating. A one-year lease lets you both see how it goes. If you like each other, renew. A three-year lease can feel like a very long three years if things don’t click early.
How to handle rent increases
Revisit rent at renewal, around 10 months into the lease. Look at the market and how the tenant has been. If area rents are up 10%, Peter would typically suggest something closer to 5% and a real conversation with the tenant. Don’t feel you have to raise rent every year, but don’t freeze it for five years because you like them either. Aim to keep pace with inflation and the market.
For context, rents in Annapolis have risen at most 5% a year over the last 22 years and, at worst, stayed flat. Rents are far steadier than home prices, which is part of why renting works as a long game.
Write a tenant handbook
This is the tool almost nobody uses. Your lease is your legal backstop, but no one reads it until something goes wrong. A handbook covers how life in your home actually works:
- How and when to pay rent
- Who to call, and what counts as an emergency
- Trash and recycling days
- Pet and maintenance policies
- What you expect from the people living there
Share it with every applicant up front. Manage from the handbook, and use the lease if you have to.
Should You Manage It Yourself, or Work with a Property Manager?
Either can work. What doesn’t work well is splitting the job.
If you do it yourself, do all of it
Peter’s advice is to handle everything: listing, showings, screening, and the lease. Showings are a huge time suck, but they let you build the relationship and set the rules from day one. Three months later, when the tenant asks about getting a dog, you can point back to the conversation where you said no pets. Treat it like a business and block out time for it every year.
You can still outsource the small stuff. If you don’t want to fix toilet flappers yourself, hire a maintenance tech and manage the work.
If you hire help, avoid placement-only deals
Many companies charge up to a full month’s rent just to find a tenant. Peter’s concern is incentives. If someone gets paid once for placement and walks away, they mostly care about getting a tenant in, not getting a great one. Look for a manager who stays involved after move-in and stands behind the tenants they choose.
How to find a property manager you trust
- Talk to several companies. Even good processes don’t fit everyone. Go with the one that best matches how you want your home cared for.
- Check NARPM membership. Most reputable managers belong to the National Association of Residential Property Managers. If one doesn’t, proceed with caution.
- Search PropertyManagement.com by zip code for vetted companies in your area.
One more thing: if you can’t find someone you trust and you don’t want to do it yourself, that’s a legitimate reason to sell. Peter says it plainly. The right manager, or the lack of one, can decide whether renting is worth it.
The Best – and Hardest – Parts of Being a Landlord
What Peter likes most: you’re providing a home for someone, the property tends to appreciate, and the tax treatment is favorable. As the mortgage gets paid down, the rent becomes retirement income. Eventually it’s a physical asset you can pass to your family, one you can actually drive by and see.
What he likes least is the “who pays for this?” fight. The gutter falls off. The owner blames the tenant who was on the ladder. The tenant blames the rotten fascia board. His advice: don’t nickel-and-dime a good tenant over $90. Let the little stuff go.
Frequently Asked Questions: Should I Rent or Sell My House? Factors to Consider to Help You Decide
Should I rent or sell my house when I move?
Rent if the market rent covers all your costs, you plan to hold for 10+ years, and you have the time or a trusted manager to handle it. Sell if you’d only rent for a year or two, the numbers don’t work, or you don’t want to be a landlord.
Is it worth renting out my house for a year or two before selling?
Usually not. The setup costs, vacancy risk, and management hassle rarely pay off over such a short stretch. The exception is if you plan to move back in.
Will renting my house affect my capital gains taxes when I sell?
It can. You can exclude up to $250,000 of gain ($500,000 for married couples filing jointly) if you lived in the home two of the last five years. Rent it more than about three years and you lose that exclusion. Depreciation you claimed is also recaptured at sale.
How do I figure out how much rent to charge?
Look at what similar homes nearby are listed for, with the same size, layout, and neighborhood. Your mortgage payment doesn’t factor in. Pricing slightly below market often rents faster and attracts stronger applicants.
How much should I budget for maintenance on a rental property?
About one month’s rent per year, or roughly 8% of rent, for routine repairs. Budget separately for major systems like a roof or HVAC.
What should I look for when screening tenants?
Set written criteria and apply them to every applicant. Common standards include a minimum credit score, verified rental history, background checks, and income of about three times the rent. Make sure your criteria follow fair housing laws.
Do I need a property manager to rent out my house?
No, but you need to either do the whole job yourself or hand it all off. If you hire someone, choose a manager who stays involved after placement, and check for NARPM membership.
How long should a lease be?
One year is the sweet spot for most landlords. It gives both sides a chance to see if the relationship works, and you can always renew.
About Peter Cook
Peter Cook is the President of Annapolis Property Services. Originally from Wales, he moved to Annapolis in 1999 as General Manager of Sunsail Sailing Vacations. While renting out his own home back in the UK, he looked for an Annapolis manager who could handle everything for owners living overseas and couldn’t find one, so he started his own. The goal was 30 to 50 homes. Today the firm manages about 680, and at the time of recording PropertyManagement.com ranked it 16th in the nation.
Peter is a licensed real estate agent, a member of NARPM, and a graduate of Southampton University. In his spare time he enjoys sailing, adventure motorcycling, snowboarding, and time with family and friends.