Should You Rent Your Home Even When It Doesn’t Cover All Expenses?

Property Management Education for success

As the rental property market is ever-changing, rental property owners are seeing shifts in rental prices and the price point tenants are willing to pay for rent across the Orlando, Florida area. 

As a rental property owner, it is essential to understand that your property’s rental rate will fluctuate. Orlando rates are significantly lower than a year ago in the current market. With that being said, the question has been raised by some property owners: Should You Rent Your Home Even When It Doesn’t Cover All Expenses?

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Orlando Real Estate Management – Property Example

For Example, let’s say your mortgage payment and all other costs are $2,900/month that’s including mortgage payment, taxes, insurance, and property management fee.

When you get your Free Rental Analysis from us here at The Listing Real Estate Management, we’ll look at similar homes in the area and subdivision. After conducting a thorough rental analysis, we inform you that rental comps in your area and subdivision rent for $2,800/month. You may think, “Oh No,” if I rent out my property, I won’t even be able to cover all my expenses.

However, we are here to tell you that it is much more beneficial to rent out your property, cover most of the costs, and gain equity and appreciation while being passive.

So, whether you have to move due to job relocation, career change, relationship change, upgrading to a new property, or just moving across town and you want to keep your asset. It is always a better idea to hold onto your asset and rent it out, regardless of whether all your property expenses are covered. You will thank yourself later!

What are the benefits of owning a Rental Investment Property in Orlando, Florida?

Regardless of whether your rental property expenses are covered, there are still HUGE BENEFITS to owning a Rental Investment Property. Some of the most rewarding benefits are:

1. Majority of Expenses Covered

The goal of owning a rental property is to make a profit and have all expenses for that house paid. These expenses usually include monthly taxes, monthly mortgage payments, and additional expenses such as maintenance and repairs.

If your property’s rent is not covering all expenses, more than likely, most of your expenses will be covered. You may not be generating enough income to pay your taxes, mortgage, and maintenance repairs or generate a profit. However, we encourage you to continue to rent your property. Generating any monthly income is better than having your house sit empty.

If you wait months for a tenant willing to pay a higher rental rate, you lose months of rental income payments. Without that rent, you are not gaining a source of income to pay monthly taxes or mortgage payments. If you have taken out a mortgage, it is essential that you are working towards paying it off, and renting your property can help to do so.

2. Building Equity 

If all expenses are not covered, renting your home is still beneficial. Although it may not be your ideal situation, the longer you rent your property, the more equity you have. 

What is Equity?

Essentially, equity refers to the portion of the property that you own. If you take out a mortgage, you do not own 100% of the property outright. The longer you rent your property, the more money you will earn to put towards mortgage payments. As a result, the more payments you make, the larger your equity is.

If the monthly rent does not cover your total mortgage payment but allows you to contribute a portion, you are taking a step in the right direction. You would have to pay out of pocket for your monthly payments without that payment.

3. Rental Property Appreciation 

In addition, over time, your property value will appreciate. This means that after a few years, the market value of your property will be higher than the initial purchase price. Property appreciation is one of the significant benefits of owning a rental property, resulting in substantial returns on your investment in the long run.

Is Renting Your Property Right For You Even If It Doesn’t Cover All Expenses?

As each rental property owner is different, there are certain circumstances to consider when renting your property despite not covering all expenses. Owning a rental property involves evaluating your financial goals, the current market conditions, and the amount of risk you are willing to take regarding your property. Here are two things to consider:

1. Financial Needs 

The most significant factor to consider when deciding whether or not to rent your property is your financial stability. Some investors may have more than enough money to cover the property expenses independently, and others may need more. We highly recommend renting your property if you need immediate income to help alleviate your property expenses. Even if you’re not renting your home at the price you would like, renting it at a lower rate will still provide financial relief.

2. Long Term Investment

Your rental property investment should be long-term; long-term investment properties will produce the highest return. If your rental property is a long-term investment, it is highly beneficial to have it occupied at all times, even if it does not cover all expenses. Having it consistently rented will only increase your equity, not hurt it.

Should a Rental Property Be My Only Source of Income?

Although owning a rental property is a highly profitable investment, as experienced property managers, we do not recommend living off one property’s rental income. As you can read in our blog post Are Rents Going Down In Florida, the rental market can fluctuate frequently. 

Rental property income is an excellent additional income; however, if you’re relying on one property as your sole source of income, you may be taking a risk on your financial stability. 

Orlando Rental Property Market

Statistics show that rents across Florida have decreased over the past year. National single-family rents have fallen for 15 consecutive months, according to DSNews. With rent decreasing across Florida, rental property owners must adjust their rates accordingly. 

Although rental rates are decreasing, appropriately priced properties are still in demand. With the current rental market in Orlando, now is a necessary time to consider whether or not you will rent your home even if it doesn’t cover all expenses. 

Remember that your rental property is still valuable and will continue to appreciate over time, even if the current rental rate does not cover all expenses. As the market fluctuates, the rent you can get for your home will change. 

Orlando Property Managers Summary

A patient rental property owner who plans will be a successful rental property owner. Owning an investment property is not always easy, but it will always be worth it. If you ask us if you should rent your home even when it doesn’t cover all expenses, we highly encourage it.

At The Listing Real Estate Management, we are happy to assist you with any questions or concerns regarding your rental property. Hiring a professional property management company in a changing market can significantly benefit your investment and overall success. If you would like a FREE rental property price analysis for your property,  Contact us at The Listing Real Estate Management, your boutique property managers, to connect with our local expert property managers today! We’d love to be a resource for you and your rental property. 

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The Listing Real Estate Management

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