Buying a New Home and Renting Out Your Current Home
With rental rates on the rise, if you’ve ever thought about buying a new home and renting out your current home, now may be a great time to do just that. Buying and renting out your home at the same time can be a little bit tricky, however, so you’ll need to plan ahead and make sure this is the right step for you.
Why Do You Want to Rent Out Your Home? Many homeowners who opt to rent out their home do so as a way to generate income. According to the latest figures from Zillow.com, rental prices are rising at the fastest pace in over a year. However, some homeowners decide to rent simply because they don’t want to sell their current home or are looking for a long-term investment. Whatever your reasons for renting, make sure they’re the right reasons for you.
You’ll Need to Crunch the Numbers. Coming out ahead financially isn’t just a matter of charging enough rent to cover the mortgage. Leasing your home can be expensive once you add up all of the costs. Not only will you have to fix up your home before (and possibly after) renting it out, but you’ll have other costs such as regular maintenance and property management fees, if applicable. You’ll need to have good cash flow and make sure you have plenty of cash reserves. Also, keep in mind that your tax situation will probably change since you’ll own two properties.
Hire a Good Property Management Company. Renting your home can be challenging, so the smart thing to do is to hire a property management company. A property manager can be an enormous help in every aspect of renting, from getting your home ready to rent to finding tenants to overseeing your property and handling all of the details. Of course, you can choose to handle the rental property yourself, but just make sure you know all of the ins and outs of renting as the process can be quite complex.
Be Aware of the Pitfalls of Renting. Whether you decide to use a property management company or not, you should be aware of the potential pitfalls of renting out your home. Some of the difficulties may include difficult tenants, damages to your property, unexpected expenses and the whims of the rental market. Unfortunately, having your home un-rented for periods of time is a possibility, so make sure you have a financial plan in place in case you don’t have tenants 100 percent of the time. Even with the best property manager you may have some months without rental income.
You should discuss keeping your current house as a rental with your mortgage professional to make sure that keeping it as an investment is a good and viable option for you financially. You should also talk to your Realtor to get their insight on what the rental market would look like for your home.
Although renting out a home isn’t the right choice for every homeowner, for those that do decide on that route, it’s often a rewarding and profitable venture.
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.
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