There are many ways people can supplement their income.
You can check out on Investors Hangout on what other kinds of investments you can venture in the future.
If you’re considering moving your family into a new home, you may feel like the only option you have is putting your primary residence up for sale.
A primary residence is the first home or apartment that you purchase. As a savvy homeowner, you can convert your home into an investment property. But before you do, we will look at three smart tips of turning your home into a rental property.
The Pros and Cons of Turning Your Home into a Rental Property
If your home has been in the market for too long and you can’t seem to sell it at a value that will allow you to break even, you may consider renting it out.
Also, if you have an extra home, you may want to supplement it as part of your income. Though it may seem like being a landlord is too much work, renting out a home might bring you more money over time. Besides, adds Own It Detroit team, you can always hire a property management company to deal with all the things you don’t want to.
While going this route can be present an excellent opportunity to with a better return on investment than stocks, it does come with its own set of challenges.
Here are some benefits and challenges of turning your home into a rental property.
- An excellent source of additional cash flow for your family
- Your primary residence has a lower mortgage interest rate
- Lower downpayments
- You get to enjoy tax benefits
- Rental properties can expose you to unforeseen liabilities
- Expensive mortgage rates
- High tax and insurance rates
- A lot of wear and tear
- Evicting a tenant can be a costly and time-consuming process
From the points above, it’s hard work to be a property owner.
There are plenty of instances where rental properties can be a struggle especially if you’re dealing with crappy tenants, unexpected maintenance, or collecting overdue rent.
That said, If you are considering turning your primary residence into an investment property, there are many implications you will incur.
You will need to work with a certified public accountant to facilitate a smooth transition. Let’s see how you can dive into converting your home into a rental property.
The first concern when turning your primary home into an investment property will be the mortgage. Your lease may require that you live in that particular house for a span of one or two years during which you are not allowed to turn it into an investment property.
Unlike a primary residence, an investment property will incur high tax rates including mortgage interests, homeowner association fees, maintenance and more. All these deductions should be considered before turn your home into an investment property.
Update Your Insurance
Update your landlord insurance to protect your home from liabilities like minor injuries and accidents that can happen in your property and covering legal fees if sued.
As an inspiring landlord, you must be familiar with the law and understand the rights of a tenant. Also, be sure to run a professional and credit check of your potential tenants.