Life changes. It can throw you a curveball that nearly takes us off our feet- especially with the ever-changing world we live in. Perhaps you’ve reached a point in life where you will need to move out of your home. It could be because of a job change, a financial reversal, or a change in familial status. Maybe you just want to downsize or upsize. Either way, you might be wondering – “Should I sell my home or use it as an investment opportunity?”. Like many others, you may become an accidental landlord.
Before You Decide to Rent Out Your House – Consider This
If you’re asking yourself any of these questions, then you’re already considering making the smart investment move. If you bought or refinanced your home before the end of 2022, you’re in the best possible position to start a lucrative investment journey.
Should I Sell or Rent My Home??
Keep your low interest rate and avoid capital gains!
The Benefits Of Becoming An Accidental Landlord
Monthly Passive Income
If you were lucky enough to lock in those low-interest rates on your mortgage, you’re in the best possible position to see monthly passive income. With your low mortgage and rental rates above that of your monthly payment, its a win/win situation. Your mortgage will be paid monthly (with a little extra on the side) and your home continues to gain equity.
Even better, if you decide to purchase another property and rates are still high than that passive income can help offset those additional rate expenses!
Move Back In
If your move is just temporary and you plan on returning to the area, you’re golden! Just time your return with your resident’s lease and you’ll be able to settle right back in.
Tax Breaks for Accidental Landlords
Oh those marvelous tax breaks. We’re talking mortgage interest, property management expenses, maintenance expenses, property taxes, property depreciation, and more!
Back in town, stopping by the home to do an inspection, check maintenance, or meet with your property manager? Depending on your time doing so, you can deduct these travel expenses too.
Always consult a tax specialist beforehand to discuss your specific deduction benefits.
Capital Gains
It’s real and can be applied to your home sales profits.
The Con’s Of Becoming An Accidental Landlord
Time Suck
Being a landlord, especially from a distance, can be a full-time job and a real challenge. Emergency maintenance happens, things can go wrong at any turn, and we haven’t even mentioned finding a tenant. A lot of time and energy goes into being a landlord but you do have the option of hiring a property management company to meet all of your needs.
Think of your property manager as your mechanic. They know the ins and outs of your vehicle (investment), and can get the job done correctly and much faster. With the proper tools and training, your investment, like your car, will run smoothly until the end of time.
Maintenance
Without a doubt, this is the biggest deterrent for most in using their property as a rental. Many homeowners think thousands and thousands of dollars a year in maintenance will be hitting their pockets, and while it can happen, it’s rare. Homes that were well maintained and in good condition rarely see such large bills. The most common issue we see in well-maintained homes is a broken garbage disposal and running toilets. Older homes, however, can see large maintenance expenses as large major appliances start to go, flooring needs to be replaced, and paint is past its prime.
All in all though, as expensive as maintenance repairs are, if you’re home’s in good condition, was properly maintained in your residency, and you intend on maintaining that kind of care to your property, it’s unlikely you’ll see major maintenance bills.
What If My Tenant Can’t Pay?
By far the #1 question we get asked daily. It’s a scary thought having to potentially pay for your own living expenses and your investments all in the same month. We certainly can’t tell you it will never happen because things just happen, so we always suggest you have enough money to cover your mortgage on your investment for at least a couple of months. So, what happens if your tenant can’t pay?
First and foremost, when interviewing property management companies, ask about their screening procedures and ask for any stats they may have on how many evictions they’ve had to do in the past year. For our company, we do deep dives into our applicants. We screen for criminal history, credit history, require recent rental history, and confirm income with their employer before moving forward. We don’t accept applicants with prior evictions, several late payments, or missed utility payments. Their debt-to-income ratio is also considered. With all of that being said, in the last 12 months, out of our nearly 700 rental homes, we have evicted only 5 accounts.
And if in the rare chance that an eviction goes through, we get possession of the home as quickly as possible, do any repairs needed, and put the home back up for rent. There will be some loss, we’re not going to sugarcoat that. But again, the chance of going through a full eviction with such a strenuous screening process as ours is rare.
You’re Just Getting Started
Accidental Landlord: A homeowner that did not intend on using their property as a rental investment.
Life throws you curve balls at the most unexpected times. But don’t let this move throw you off. Homeowners in this situation are at a big advantage. With ZERO commitment, we can provide you with a free rental rate estimate so you have everything you need to make the best decision for you. Don’t think its a good fit right now? No worries! We’ll do our best to guide you to a trusted Real Estate Agent if you need.
