Most people do not live in the first house they purchase for the rest of their life. Typically a first home is a starter home, something you could afford at the time, but eventually grow out of. Many people advance in their career and are earning enough money to move up into a bigger home. Typically most people sell their first house in order to buy another home. However, it may make sense in your situation to utilize your current home as a rental property.
There are pros and cons to using your current home as an investment property after buying another home. It can be a way to increase your net worth as the home continues to increase in value. It can also serve as another form of monthly income, if the rent amount exceeds the mortgage and maintenance costs of the property. However, keeping a house as a rental can also be risky. You’ll need to be prepared to be a landlord or to hire a property manager to take care of the property. You’ll also need to be prepared for any damage that may be done to the home or any gaps in time between renters.
Here are some questions to ask yourself while considering if you want to keep your home as a rental property:
- Can you get approved for a mortgage while still owning your current residence?
- Do you need the equity in your current home for a down payment on another house?
- Will it positively or negatively impact your cash flow?
- Can you afford both properties if your renter doesn’t pay on time?
- Also, can you even sell the property for a profit?
- Can you yield a high enough monthly rent to cover costs?
- Can you make the payments on both homes in between renters?
- How will your rental income affect you at tax time?
- Are you prepared to be a landlord?
- Would you want to have a property management company take care of matters?
- Will you be able to keep up with the maintenance on two properties?
- How will you screen potential renters?
Thoroughly examining each of these questions to assess your readiness to own a rental property. Determine whether or not you are ready to handle the responsibilities of owning two properties, and whether or not a rental property will be a wise investment for yourself. For expert guidance and opinion contact Aceland Mortgage.