Turn Your Home into a Rental Property When Forced to Move
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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 have reached a point in life that 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. Either way, you might be wondering – “Should I sell my home or use it as an investment opportunity?”
Before You Decide to Rent Out Your House – Consider This
Would you want to live in the house again?
Is this a temporary arrangement?
Do you expect to return to the area within 5 years?
Could you afford to pay the mortgage for several months until a tenant could be found?
Will you be buying or renting after your move?
If buying, could you qualify for another mortgage if you kept this one?
If you expect that you may be moving back into the area within the next few years and would love to move back into this home, then renting it out could be the best decision!
The Benefits of Renting Out Your House
Think of it like this, your tenant is paying your mortgage and earning equity in your house each and every month. Even if you never wanted to move back, if the property has a positive cash flow (think at least $100 per month) then it could be a great idea! If in the future you decide to sell, you will have more equity in your property plus the appreciation in value over time. That is all in addition to the pocket change that you earned.
Can You Afford to Rent Out Your Home?
The next thing to figuring out is your home’s profit margin. How much could you reasonably rent your house for in today’s market? If you are unsure, we’d be happy to create your personalized Rental Valuation! Things you should also consider when reviewing your property’s finances are routine and unexpected maintenance, property taxes, and insurances; You can expect that roughly 50% of the monthly rent will be needed to pay for these things. Youll need to upgrade your homeowner’s insurance to landlord insurance and change your property tax status from homestead to investment. Make sure you also account for advertising costs and credit check fees to get a tenant into your property. You may want to pay an attorney to draft a lease agreement or contract with a property management company to handle some of these major aspects. We also suggest using Cozy- its a great and inexpensive program for do-it-yourself landlords that takes the headache out of renting your home! Read our break down HERE!
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