You have bought a second home and starting to plan for what to do with your previous place. You may choose to either sell or rent it out. But, there are many reasons why renting out your home is more sensible than selling it. While selling your property can mean getting a big amount of money that you can use for any purposes, renting out your property can help you get a monthly income. Other benefits of renting out include the following:
Act Like a Real Investor
You probably bought your first house with the intention of occupying it, but when the time comes to buy another property, your first home can become your investment property. This means that you will be acting a like an investor instead of a mere homeowner. You can prefer to have it rented for one or two years. You can always decide to sell it in the future when your situation changes.
Enjoy Cash Flow
You have probably paid a bit of your mortgage loan associated with your first home and renting it lets you enjoy some cash flow every month. Even a few hundred dollars can come in handy, especially when money is tight.
Moreover, renting out your house can diversify your investments and income streams, letting you minimize your financial risk. Once your mortgage to that property is paid off, you can keep the rent as a monthly income. It’s just important to ensure that you find a good tenant since a bad tenant can leave you spending more money on repairs and maintenance than what you could get from their monthly rent.
Let your Home Increase in Value
Home values tend to increase year by year and letting time pass by renting out your property will mean that you might be able to sell your home at a bigger price in the future than when you sell it today. By renting it out, your tenants will pay down your mortgage balance while the value increases. You can re-assess home values between tenants and lease terms and know when it is time to sell. Get more information on this online.
Enjoy some Tax Benefits
As a rental property, there are tax benefits you can take advantage of. If you rent your house instead of selling, you have to depreciate it for tax purposes. Usually, you have to divide the amount you paid for the home, plus the major improvement costs (less the land value) by 27.5 (the number of years a home should be depreciated) to come up with an annual depreciation. Along with this, other expenses like repairs, property taxes, and community association fees can be deducted.
When you decide to rent out your house, keep in mind that as a landlord you will need to maintain your property. You shoulder all repair and replacement bills. But you can save the headaches by working with a property manager if you can afford their services.