If my house doesn’t sell, should I rent it?
In a market where selling a home can be a challenge many sellers are thinking about renting their house out. Does that make sense? For some the answer is, yes. For others, there are several factors to consider.
1. Do you need the proceeds from the sale of the home? If you are buying another home can you qualify for the mortgage without selling your existing home. Remember, lenders usually only count about 75 percent of the rental income toward your ratios. Talk to your lender before making the decision to rent out the home.
2. Will the rent cover your expenses? Add up the cost of your mortgage payment, taxes, insurance, maintenance, and property management fees to determine if the rent will cover these expenses. If not, you’ll have a negative cash flow each flow. Don’t forget the cost of advertising, and vacancies as well.
3. How will it affect your taxes? If the home has been your primary residence for two out of the last five years you qualify for a capital gains exclusion of up to $500,000 (if married). If you rent the home out for a year or more, be aware of how it affects your tax situation.
4. Are you prepared to be a landlord? If you manage the property yourself, be sure that you’re prepared to be a landlord and to deal with tenants. Also, be aware that tenants rarely take as good of care of the home as you did. At the end of the rental period you may need to replace carpets, paint, and do other fix-ups.
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Bradenton Real Estate
