What To Consider Before Turning Your Home Into A Rental
If you want to move soon, you may want to consider turning your present home into a rental property instead of selling it. Having a rental, otherwise known as an “investment property”, can be extremely beneficial.
If you are looking to turn your primary residence into a rental or investment property, here is a list of things that you should consider first:
1. Do You Want To Hold On To Your Home’s Value?
When people move from one house to the next, they will typically take the equity from one home that they’ve accrued over the years and apply it to buying the next one. One of the main reasons that homeowners decide to turn their homes into rental properties is that the housing market has lowered their home’s value.
By continuing to rent out a home that is at a lesser value, you can hope that the home’s value will rise over the time it is a rental so that you can eventually sell it for a good price. This is a great way to keep afloat when the market isn’t looking so hot.
2. Do You Want Some Extra Income?
One of the other main reasons that homeowners decide to turn their homes into rental properties is so that they can make some extra income. Many homeowners find excellent returns on investments.
The cool thing about turning a primary residence into a rental property is that you can retain the low interest rate that you likely obtained when purchasing it originally.
3. Do You Want To Save on Capital Gains?
Because the government wants to promote homeownership, they have created many tax exemptions that allow homeowners to sell their homes without paying taxes on the capital gains.
If you’re single, you can save yourself from paying taxes on up to $250,000 in gains. If you’re married, that number moves up to $500,000
Unfortunately, to take advantage of these massive savings, you must have lived in your home at least two out of the last five years. If you turn your home into an investment property instead of selling, you may be missing out on a huge pot of money.
If you are planning on turning your house into a rental property, here are a few action items that you need to take into consideration before you finally jump the gun.
For starters, figure out the equity in your property. Would it be more reasonable for you to take in some rental cash flow or wait to build those capital gains?
Secondly, are you looking to increase and expand your revenue streams or do you want to keep things straightforward?
Thirdly, try and determine where the market is headed in your area. Will you be able to make a good income by renting your property out because the area is on the rise or do your foresee an economic decrease?
We hope that this article has given you the necessary motivation to take the plunge and turn your home into a rental property! Have you had any experience with renting a property in the last? Let us know about it in the comments!