Have you been trying to sell your home, and not finding buyers? As a result, you may have considered renting your home. Turning your home into an investment property might just be the right decision. When making the decision though, it is important to look in the mirror and ask yourself some questions. Changing your humble abode into a cash flow machine may not be as easy as you think.
Why should you consider renting your home?
The market for rentals is strong.
Many people struggling to get a mortgage want to live in a nice home. Others are looking but not ready to buy. Flexibility, the lack of a down-payment, or the need to rebuild credit all play into this decision. There are always a lot of these families looking for a great place to live.
Are Realtors trying to convince you to invest in updating areas to make your home competitive in the sale market?
Save that money and just make sure everything is functional and clean. Renters are not paying extra for updates. They mostly are paying for bedrooms and bathrooms. This is a short-term home for the renter and these are funds you can invest differently.
How comfortable are you with other types of investments?
If you enjoy the Wall Street roller coaster, keeping a rental home may not seem like an exciting investment. Does having somebody else pay off your mortgage, developing equity, and enjoying appreciation and tax breaks sounds appealing? Then owning a rental property may feel much safer than sending your money to an asset that exists on paper.
Before You Make The Decision On Renting Your Home
If the idea of renting your home sounds great, a little caution is also called for. In fairness, there are also risks.
Costs of owning the home will not disappear.
Does your financial situation allow you to absorb the cost of maintenance and emergency repairs? Can you absorb a month or two with no income coming in from the home? If you have a large mortgage payment, can you accept that rent might not cover the full amount ? Remember a portion of that mortgage payment is actually going to principal which is similar to saving as you develop equity.
How do you feel about dealing with tenants directly?
Can you accept that there is no tenant that will ever treat your home as kindly as you did? In your mind your home can you adjust to the idea this place you now call home must now change to your investment.
Maybe the investment part sounds great but you really do not want to deal with tenants. it is worth it to pay just a little more to let all of the problems that may come up be handled by somebody else? If so, you will want to look for an intermediary.. a property manager.
How will converting your primary residence to an investment property affect your tax situation? There are many tax issues related to renting a home. Can you benefit from them? Possibly your first consultation should begin with your tax advisor.
Become an Investor By Renting Your Home
Many people have found that converting their home to a rental property is the perfect way to begin investing in real estate. The returns may not be the same as if you purchased a home specifically for investment, but there are many advantages. Familiarity with the home, the area, and expected costs. The fact you already own the home and will avoid acquisition costs. Your accumulating equity will also continue to grow as you allow your tenants to pay off your mortgage.
A couple of final words of advise.
- Make sure there are no prohibitions in your community for offering a rental.
- Let your head, and not your heart, be the final decision maker.