Why It’s Not Wise To Rent Out Your Property For A Short Time
After the foreclosures during the housing crisis, many people affected are now renters. Millennials also have not saved enough for down payments as their lower incomes are eaten up by student loans and rents. There are more people outside there who are stuck in the rental market because of finances but also, most people nowadays don’t think owning a home is a wise investment. All these factors have led to low vacancy rates in the market and as a consequence, rental prices have been continuously soaring high.
This is the reason why it might wise for you to rent out that beautiful apartment. For homeowners who are unable to sell their homes at a reasonable price, renting may be a good deal to consider. But becoming a landlord requires one to do some little homework first.
“Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.” ~ Jack Welch
Before renting your home, take note of the following.
Objectives and Goals
Rather than letting your property to sit idle, you can rent it out especially if you’re in a saddling situation where you have two mortgages. Note that you may require a property manager to manage your property and expect to pay 10% of the rental income to such services. Also, it’s good to know that you are responsible for the costs of major repairs and maintenance.
So if you want to rent your home mainly for income, bear in mind that you’ll spend about 2% of the purchase price of your home on maintenance. Remember that the expenses associated with renting, depreciation and mortgage interest are tax deductible. It’s good to get a full appraisal by a professional in order to get comparable rents and not just comparable market values.
Your Future Plans & Laws of the State
Tax laws especially those around capital gains vary depending on the amount of time you’ve lived in the property before it’s sold. If you’re planning to sell the same property that you want to rent it out in the next few years, ensure that you get acquainted with time limits as well as tax implications.
Rental properties sold at a profit may be subjected to repayment in case of any depreciation deductions that the homeowner claimed on the property prior to the sale. Renting isn’t a profitable business if you’re just in it for a short time. Nevertheless, you can build a home equity line of credit using someone else’s money after renting your property for a long time.
Know Your Responsibilities
You should understand the services they are legally obligated to provide to maximize ROI. It’s good to know what you are required to provide to avoid unnecessary expenses. Because you want your home to give you consistent income on monthly basis, it’s your duty to screen tenants so that you not only get a person who will be paying rents on time but also get a tenant who will take care of your property.