If you are considering purchasing a new home, you have to decide what to do with your current home. Most people automatically assume that they will sell their old home, but that isn’t the only option.
“You could retain ownership of that home and rent it out to tenants. “
This can be a great choice; you get to continue to build equity in your home while collecting rent. It is also a good option for those who don’t want to accept the current value of their home.
If low home values are keeping you from moving, consider becoming a landlord and renting out your current home. Read on to learn more about renting as an alternative to selling.
Maintaining Cash Flow from Your Rental
Obviously, if you are going to rent out your home, you want to generate a positive cash flow. Before you put up the “for rent” sign, consider these factors.
1. Figure out how much rent you can expect to collect
Check listings in your area for similar properties. You can visit open houses, talk to other landlords, or consult a realtor for more information.
2. Expect to have times where the home is vacant
You shouldn’t plan on collecting rent every single month. Even if you can find a tenant quickly, there will be some transition time. The national vacancy rate is around 10%, but it varies by location. Talk to a realtor about local vacancy rates.
3. Figure in your expenses
Your profit is not simply rent charged minus your mortgage payment. Be sure to calculate all of the expenses, including property taxes, insurance, utilities, repair costs, and property management fees.
4. Determine your potential profit
Deduct all of these expenses, including potential vacancies, from the amount of rent you expect to collect. A profit of $1,200 to $2,400 per year meets the industry standard. If you will break even but can expect to make a larger profit by selling later, it may still be worthwhile.
Tax Deductions for Landlords
As a landlord, you will be eligible for certain tax deductions.
1. Interest
You can deduct interest paid on mortgage loans used to buy a property or renovate it. You can also deduct credit card interest paid on charges related to the rental.
2. Depreciation
The value of the rental home, but not the land, can be deducted over a period of years.
3. Repairs
You can deduct the full cost of repairs that you make to your rental property in the year that you pay for them.
4. Travel
Travel expenses related to the rental can be deducted.
5. Home office
If you maintain a home office to conduct business related to your rental property, your home office expenses can be deducted.
“These deductions may outnumber your rental income, creating a net loss. “
This isn’t something to worry about; it’s pretty common, especially if you are just starting out or only have one or two properties.
Although there are some restrictions, you may be able to deduct this loss from your income from your regular job.
Property Appreciation
Property values are once again on the rise. This upward trend is expected to continue over the long term. Holding on to a property and building equity can pay off greatly in the end.
If you are considering renting out your home, contact McMath Realty for guidance. McMath Realty can help you manage your rental.
We offer a variety of services to assist you in maintaining your property, includinginvestment consulting,property management,rental management,property inspections, and home maintenance services.
We manage rental properties in Chandler, Mesa, Gilbert, Scottsdale, Phoenix, Glendale, and all areas of Maricopa County.
We advertise your property in the MLS listing, on multiple websites, and on our own website. We also use signage to attract potential renters who are out driving around and looking for rental opportunities. We will assess your property, recommend improvements, and help you price your unit appropriately.
Contact McMath Realty at https://mcmathrealty.com//contact.php to learn more about how we can help you keep your rental property in great shape and take care of the day-to-day dealings with tenants!