Turning a home into a rental property can be a lucrative decision.
Have you ever thought about turning your existing home into a rental? I have people asking all the time about having a rental property or buying rental property. But one thing you may not have thought about is if you take your existing home and live there for 12 months, you could turn it into a rental. Most of us that purchased a house in the last year or so got a really low interest rate. You have an excellent opportunity to get more rent for the house than you're actually paying in a mortgage payment. That's a great way to take advantage of that and get positive cash flow.
You have passive income coming in, there are tax advantages, and you have a lower interest rate on a house you've had for a year or two. But what if you have a lot of equity in your house and think, “Oh my goodness, I need to cash out?” Well, there are home equity loans that you can take out. You might be able to pull some of that equity out to buy rentals. You are going to find that there are great tax benefits when you do a rental home.
"You have an excellent opportunity to get more rent for the house than you're actually paying in a mortgage payment."
The only con I can think of on turning your primary residence into a rental is if you don't want to manage the property. Sometimes if you only have one home, it's not a big deal. There are a lot of tricks of the trade. If you call me, I'll tell you what they are. But there are many different ways to ensure you get paid on time. But if you're busy and don't want to be bothered, a lot of property management companies will take care of getting those tenants qualified in the house, any repairs, and making sure you get paid. And they typically charge about 10% a month or whatever the rental payment is. To me, it's money well spent.
If you've got questions on rentals and what you can do on your house, give us a call. I think many people sometimes worry that if they have a rental and sell it, What's going to happen to the tax deferral on that? Because the nice thing about not selling your primary residence, getting the cashout, and turning it into a rental is you push the tax gains out into the future. Once it's a rental, you can do a 1031 Exchange if you do sell it. So you can totally defer tax gains for a long time. There are a lot of pros and cons, mostly pros, to turning your primary residence into a rental.
Hopefully, you found that helpful and interesting to you. Remember, if you have any questions about this topic or real estate in general, be sure to give me a call. I would love to be your resource for all of your real estate needs.