Sell or Rent: Everything You Need to Know to Make the Right Decision

Moving out of your current family home is indubitably followed by many important questions—the most important being: what should you do with your property? Should you sell it or rent it?

Renting might seem like the ideal answer, particularly for anyone who’s searching for a passive income source. However, you would need to consider tax implications and ongoing expenses, like maintenance costs.

On the other hand, selling is also an attractive option if you want to increase your liquidity, but this option might not sustain your future mortgage payments or optimise returns when considering long-term capital growth prospects.

This post will guide you on when to rent or sell your property according to the rental market, your home value, and property taxes, to help you make an informed decision based on your needs.

Why Is It So Hard to Decide Between Selling Your Home or Converting It to a Rental Property?

Making the decision to either sell or convert your home into a rental property can be very challenging, given that it’s often a major investment decision.

For instance, you can choose to keep your home as a rental investment property when rental rates are strong or decide to sell when home prices are on the rise to make a profit. If market predictions prove otherwise, you can decide to sell your house to avoid inflating your tax liability.

In short, there are pros and cons for both scenarios, which means there’s no “right” answer—it all depends on your unique situation. You should weigh each option to determine the best course of action.

When Renting Out Your Perth Property Is a Good Choice

Here are cases where rental agents would recommend that you turn your family home into an investment property:

The Potential Rental Income and Cash Flow Benefits Your Financial Situation

An area’s rental demand is a good indicator that you’ll receive steady cash flow on a property. For example, Perth has a very low rental vacancy rate that keeps rental demand consistently high.

However, you should still ensure that you’ll get an adequate cash flow,check if the potential rental income covers your property holding costs.

If you have adequate liquidity and your current needs are well taken care of, renting your property can potentially be a remarkable source of passive income.

Strong Demand for Rental Properties in Perth

After Sydney and Canberra, Perth is ranked third nationwide in median weekly rent, averaging at $669. What’s more, Perth’s rental housing market is growing exponentially, with a 13.6% annual rental growth in the past year. This is indisputably the highest rental growth across the capital cities, indicating that there’s a strong demand for a good rental property.

Pro Tip: Remember to factor in tax considerations and assess the operating costs to ensure that you’ll gain profit.

Attractive Rental Yields in Perth’s Property Market

Property investors point out that an area’s rental yield is a great metric to gauge the return on a rental property. Due to Perth’s high rental yield (which stood at 4.93% in Q3 of 2024), you can maximise investment returns on your property.

With this information in mind, you can utilise this metric to determine whether the predicted profit on your property will sustain your needs (or be a source of passive income to support your mortgage or home loan payments).

You Expect Home Values to Rise

According to Domain’s forecast report for 2025, the Perth house market value is expected to rise by 8% to 10% and the unit market value is estimated to go up by 4% to 5%. Again, note that these numbers are the highest in Australia when compared to predictions for the other capitals.

With the continuous shortage of properties on the market, home buyers are likely to avert their attention to rental options instead.

Retaining your property for renting could take advantage of buoyant leasing conditions and the long-term, capital growth potential.

When Selling Your Perth Property Is a Good Choice

In some cases, selling your property in Perth will make more sense, financially speaking. Check if these scenarios are applicable to your case:

Liquidity in the Near-Term Gives You Purchasing Power

Liquidity is a must when you want to have purchasing power. You’ll also need liquidity when you have loan payments and other outgoings stacking up your financial calendar. When cash isn’t available to fulfil these commitments, tax advisors recommend selling instead of renting.

Renting also requires a buffer of funds to ensure that your house offers appealing and maintained amenities for future tenants.

Instead, you can sell your house to buy another home or use the liquid funds to make other profitable investments. Ensure that you do your own research with a thorough, detailed budget analysis.

You Prefer Not to Be a Landlord

Being a landlord comes with a set of responsibilities that not everyone is eager to tackle, like tax planning, regular maintenance and repairs, following regulations, and the list goes on.

For instance, some of your obligations will be to ensure that your home is safe with secure locks and doors, fitted with compliant smoke detectors and blind cords, to name a few. One could do away with all these responsibilities by simply selling their home.

However, you should consider the option of working with a property management company. Not only will it reduce the hassle of maintaining a functional home for your tenants, but also aid with rental price setting, compliance management, insurance premiums, and collecting rent.

You Want to Diversify Your Investment Portfolio

Lastly, owning the same type of property might adversely affect your future capital growth and you might end up losing money. This is why it’s crucial to diversify your portfolio.

If you have more than one investment property on the rental market, study the option to sell your next property while taking into account the property type, tax implications, and the current house value. Selling your home will provide you with enough liquidity to help you invest in another type of property elsewhere.

Sell or Rent: Comparing the Costs

Whether you choose to sell your house or rent it, you’ll find that you’re going to have to handle several costs. On one hand, you’ll have to settle your mortgage early when selling your home. On the other hand, rental income might not cover all your expenses from your new property upkeep to mortgage payments.

The following breakdown will help you assess these costs to ensure you make maximum profit:

The Costs of Renting Out Your Property

• Searching for a Tenant: To find tenants, you’ll need to advertise your property on the market, which will incur additional leasing and marketing costs. Most tenants will provide credit and background checks to ensure their credibility for tenancy. If not, you might need to allocate some funds for this process.
• Maintenance: Every home needs repairs and maintenance on a regular basis. Maintenance should cover smoke detectors, hot water systems, water leaks, pipework, AC systems, and electrical work. Thus, you’ll need to assign a small percentage of the house value to the maintenance and repairs budget.
• Insurance: Insurance includes paying for homeowner and landlord insurance, the latter of which is useful in cases of injury inside the property or damage dealt to the house.
• Rates and Taxes: A capital gains tax will eventually affect your profit, and your property might also be eligible for land tax. Consult a tax officer to learn more about the taxes levied by local Perth authorities and the tax deductions you’re eligible for.
• Property Costs: Property management services charge a percentage, of your rent price to lease and manage your property investment. Interview property managers first to know the different percentage cuts, their service scope and vacancy metrics, to choose what’s best for you.
• Mortgage: Your mortgage payments should be fully or partially covered by your rental income. If these payments are severely higher than your income, renting won’t be financially beneficial to you.

The Costs of Selling Your Property

• Mortgage Settlement: Selling a home with remaining mortgage payments expedites paying off this loan. This could include paying the lender an early exit fee. Then, as soon as you sell your home, the following payments will go toward settling the remaining portion of your mortgage.
• Home Improvements: You must prepare your property to get a fair price for it. Costs will include house repairs, deep cleaning, landscape improvements, and home staging. While these costs are considerably high, they can secure good offers for your home, leveraging your profit.
• Real Estate Agent Fees: When hiring a real estate agent, you must discuss the fees relevant to selling your house. This includes the flat fee, sale percentage fee, and incentive bonus fee. These payments are determined and agreed upon by the seller and agent before signing.
• Conveyancing: Once someone accepts your house offer, you’ll need to transfer legal ownership to them. This process is known as conveyancing and is crucial in all real estate purchases. The process is usually carried out by solicitors or conveyancers, who also require fees.

Want Help Considering Whether to Rent or Sell?

Still not sure whether to sell or rent? At HERE Property, you can get a second expert opinion to ensure that you’re making the right financial decision and maximise your property’s profit. Contact one of our experts today to get a free-of-charge consultation.