You have inherited a house and don't know what to do now? Sometimes you are inclined to sell, then you would rather rent. You have the feeling that there is no right decision. Thanks to my many years of professional experience as an expert and real estate agent in Tyrol, I can show you the advantages and disadvantages of selling and renting. These should make your decision easier.

Per rental: Additional money and a property as an investment for the future

A clear advantage of renting: regular money for doing hardly anything. Normally, rent is a reliable source of income that can be adjusted well for inflation.

Another consideration could be that you can keep the house if you rent it out. Maybe your children or grandchildren will want to move into the house one day. If you rent out, the house will at least not be empty in the meantime.

I certainly don't want to dismiss these two points. Additional income and owning a property are basically not a bad thing. However, I would also like to point out the negative sides of renting, which are often forgotten.

Contra: Taxes and market price reduce income

Do you know that you have to pay extra tax on rental income in Austria? If you rent out a property, you must report this to the tax office. There, the tax portion for the rent is then deducted via the income tax.

How much is the rent taxed? That depends on your personal tax rate. This is calculated from the seven possible types of income. Depending on the rate level, 0 - 55 percent of the total income is taxed and deducted proportionately from all types of income.

In addition, when renting a house, you have to make sure that it is not too high. Otherwise, potential tenants will decide to buy a house because it is more profitable. For example, if you ask the usual price in Tyrol of about 17 €/m², this is an acceptable price for a 40-m² garçonnière in good condition.

Houses, however, quickly have 130 m² of living space. At €17 for each square metre, this results in a rent of €2,210. That is a price that many tenants no longer want to pay.

In 2021, 2,000 euros can probably be considered the magic upper limit. Those who pay more per month usually prefer to buy their own house right away and pay off such an amount as a loan instalment.

In addition to the financial aspects, it is important to remember that when you rent out a house, you remain the owner and therefore have responsibility for concerns around the house.

Contra: Your responsibility leads to costly regulations and obligations

If you rent out your house, you are still responsible for it. This means: As a landlord, you have to take care of the tenants' concerns. In addition, there are regulations and obligations that you must fulfil - depending on the regulation in the contract. These include:

• Preservation of the house (e.g.: roof, façade, pipes)
• Maintaining the heating equipment - heating, water boiler - and carrying out any repairs.
• Repair and rectification of serious damage to/in the house (e.g.: burst water pipe); also significant health hazards emanating from the rented property fall under this (e.g.: mould infestation, leaking gas pipes).
• Compliance with administrative regulations: For example, the landlord is responsible for ensuring that the electronic equipment in the building functions properly and is safe.

This also means that you have to deal with tenants' complaints or requests on a regular basis. Letting thus requires an investment of time and money on your part. Especially if you have bad luck with tenants.

Con: Risk from fraudulent tenants and loss of rent mean loss of money

It can happen that a tenant pays late. But what happens if the rent is not paid at all? And what if tenants deliberately do not pay? I would like to present these two risks to you in more detail.

Risk #1: Fraud by rent nomads

Unfortunately, landlords get hold of so-called "rent nomads" time and again. These are tenants who deliberately do not pay rent. The problem with this is that it often takes a long time to bring an action against the tenants. Until the house is evicted, the nomad lives in your house for free. Some of these nomads also disappear suddenly - of course without paying the rent debts.

And the proverbial icing on the cake: rental nomads usually leave behind a big mess. From damaged furniture to hoarded items to dilapidation: You as the owner must repair any damage in order to be able to rent out the house again. You bear the high costs for this, because the nomads are hard to catch.

They are thus not only missing a few months' rent from the nomads, but also the rent for the period of renovation. This brings me to the second risk,

Risk #2: Reduction in income due to loss of rent

The risk of a prolonged loss of rent is called rent loss risk. It does not matter whether the house is empty, temporarily unrented or not bringing in any money due to rent nomads. Missing rent payments reduce the value of the property. However, I do not want to go into depth on this topic in the current article - that would go beyond the scope. However, it is important to me that you are also aware of this risk.

Please have these two risks in mind should you decide to rent out your home.

I am being completely honest with you: As a real estate agent, I know that many people rent out their house until the "perfect time" to sell comes. They want to profit from the continuing increase in property prices and delay the sale as long as possible. I can well understand that, after all, the increase in value in recent years has been enormous.

However, as an expert in my field, I can assure you: The current market situation speaks for a house sale.

Pro sale: Good market situation brings high capital for new investments

Due to the low-interest phase, the sales prices for real estate in Tyrol are enormously high at the moment. Why not wait? At some point the sales prices will stagnate again - in the worst case even fall - because they are no longer affordable for normal earners. So it's better not to wait too long to get a good price.

In addition, when you sell your house, you receive a lot of cash capital for new investments. Yes, a house is also an investment, but you cannot dispose of it freely. By the way: If you merely rent out the house, you will only earn the sum paid when you sell it after a few decades.

Reason #3 for selling the house: "Out of sight, out of mind". By this I mean that by selling the house, you also sell the associated burdens. Clearing snow, mowing the lawn, cleaning or maintenance no longer fall within your scope of duties.

Moreover, there are hardly any nasty surprises when selling, which is unfortunately always the case with tenants. You also don't have to fear any loss of rent. Once you have received the money from the sale, you are released from any obligations.

Of course, selling is not the universal solution. There are also disadvantages that you should consider before signing a purchase contract.

Cons: Taxes and sales errors quickly cost you a lot of money

A disadvantage for many sellers is the real estate income tax (ImmoEST) that you have to pay when selling a house in Austria. If you sell your property without an estate agent, you not only have to pay the tax, but also calculate it.

Taxes are not the favourite topic of the average consumer. Especially the numerous exceptional cases make many a house seller sweat. That is why I have summarised the most important information on the ImmoEST for you in a small series of articles entitled "Selling a house and taxes".

When selling, you also expose yourself to the "dangers" of selling real estate. For many owners, selling real estate is the "(legal) deal of a lifetime", i.e. the sale of the largest asset.

In the high-price province of Tyrol, for example, sums of 700,000 euros and more are involved. Unfortunately, many things can go wrong, especially in private sales. Even small price fluctuations of "only" 10 percent can quickly mean 70,000 euros more or less for such sums. You don't want to give away this amount of money.

Selling a house can therefore become a very stressful situation. To prevent these mistakes from happening to you, I have written a post on the "5 most common mistakes when selling a house".

Vacancy is not an alternative

After all these arguments, are you considering leaving the house empty? You would neither have the problems as a landlord, nor would you have to undergo the stress of a house sale. And: Maybe your house will bring you even more money next year?

As an expert, I would advise you against this. A property that stands empty for a long time rarely increases in value. Why? The following can happen:

• Your house becomes the object of vandalism (e.g.: graffiti sprayers).
• Vermin - such as spiders or rats - take up residence.
• Mould growth occurs.
• Pipes freeze and break as a result.

All this reduces the sale value of your property. In order to get more money again, you have to carry out renovations. Costs that you can save by renting out or selling the house right away. But which of these should you do?

The right decision needs comprehensive advice

I hope that the arguments outlined above have enabled you to decide in favour of selling or renting. If you are still not sure which is the better choice in your case: Consult an expert for advice.

In an initial consultation, you will have the opportunity to talk about your case with an estate agent or surveyor. They will discuss your personal circumstances and the property. Afterwards, you can decide together whether it makes more sense for you to sell or rent. A reputable real estate professional will analyse your situation in detail so that they can offer you the most profitable solution.

At Arealita, we also take a lot of time during a free initial consultation to address your case. Our many years of experience as an appraiser and real estate agent make us a competent contact for your house in Tyrol. If you would like to obtain a non-binding offer or simply contact us, click on the purple button.

Kind regards
Yours, Bernhard Großruck

I would like to get a non-binding offer for my house in Tyrol.

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