No one knows better than those who want to sell their homes that the housing market is in an unbearable slump. As you sit and wonder when the market will rebound, you might ask yourself if it’s worth the wait. Maybe you’re considering renting it out instead.

Right now, most people don’t have a choice. Houses aren’t selling like they used to and buyers are right to be nervous about buying in such an environment. If you can’t afford to wait any longer, you might find more people willing to rent your house rather than buy it. If you do end up renting out your house, you could end up selling it when the market turns around. You’ll hopefully make more money selling it in the future than you would if it sold today.

This is a pretty big decision and you should take a number of factors into consideration when trying to decide whether to rent instead of sell. Here's what you should consider.
1) What are the tax issues?

The government provides tax breaks if you’ve lived in your home for two of the last five years. If you plan on renting out your home for just a year or even two, you should still be eligible for such tax breaks. If your renting plans would turn any gain into taxable ones, you might be better off selling the property instead of renting it out. Unless you move back into the house at some point and live there for at least two years to re-qualify for the exemption, there might not be another worthwhile solution. Each person needs to assess their own situation or consult a tax professional for sound advice.
2) Can you afford to rent?

If you’re looking to sell your home, you probably are moving. In order to buy a new home or live comfortably in your new area, you may have to sell your house to raise the necessary capital. Therefore, renting out a home is simply not always an option.

Owning two homes, even if you’re renting out one of them, requires a lot of money – usually more than the average homeowner has lying around. What if your tenant stops paying rent? Will you be able to make the mortgage payments despite this situation? This could all be a bit risky for the usual middle-class family.

You should also consider what would be done if your renter damaged the property or caused problems that lead you to evict him or her. Eviction proceedings can be expensive and time-consuming. The average eviction can cost between $2,000 and $5,000 and lasts as long as 18 months. If the tenant is still in the house, refusing to pay rent, the cost would fall to you. Financially, if you rent instead of sell, you should be prepared for the worst.
3) Will the house appreciate in value?

If you expect prices in your area to go up during the next three years, renting it out might make sense. Keep in mind that in the past, real estate has always appreciated at the rate of inflation, which is about 3% a year. Just know that even if property values have gone up in your neighborhood these past few years, that doesn't mean the trend will continue.

Consider your house an investment, even in this market, and consider the part it plays in your overall portfolio. When thinking about all of your investments, do you believe you are diversified enough? If you have most of your money tied up in two houses, you probably need more diversification. You might be better trying to sell the house and, if you are able to make a profit, putting the money into something other than real estate.
4) Is it a good sales market or a good rental market?

Nothing is as constant as change. For years, the market was better for sellers than for landlords. Now, some would argue, the opposite is true. It also depends on where in the country you live. It can’t hurt to get the house appraised and then ask a local real estate agency for rental and sales numbers in your area. If you are convinced by the evidence that you live in a stable market with potential income from rent that will cover your mortgage and anything else that might be related to renting out your house, it makes sense to rent. You must figure this out first.

5) Do you ever plan on coming back?

If you plan on moving back to the same area, you might get priced out of the market if you sell your house. Hopefully having had strangers in your home won’t make you nervous or uncomfortable. You need to be able to leave the house behind with peace of mind and remember this is more business than personal for a few years. If you can’t do this, it makes more sense to rent instead of sell.
6) Are you the landlord type?

This is not something to be taken lightly. Especially if you’ll be out of town frequently, overseeing the property can be very difficult. Of course, if you're willing pay 10% of the monthly rent to a property-management company, a lot of the headaches are removed. Often times, property managers take care of everything related to a property. They put it on the market, screen tenants, collect rent, maintain the property, investigate complaints and some even take care of paying the mortgage.

When you try to decide whether to rent instead of sell, it’s best to take everything into consideration.