| Sell or Rent? |
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This is a good question, and no answer is correct for everyone. You see, everyone has their own unique situation.
Let’s assume that you are current on your mortgage, or if you no longer have a mortgage. Your credit score will allow you to get a mortgage to buy another home, and you have enough available cash to make the down payment and closing costs. If you can get enough rent back to cover your mortgage and taxes, this may be an opportunity to turn your present home into a rental property. But first, speak with a mortgage professional. In order to carry a rental plus another qualify for a home mortgage, your lender must see a signed rental contract. But only 80% of the rental income counts towards your total income. You have to show that you have enough resources to pay both mortgages, just in case the property is vacant for an extended period of time. And you may incur other expenses as well. Your tax rates will change since the property is no longer a homestead, but is now an income-producing asset. You may want to speak with your accountant to learn how renting your property will impact your income taxes and deductions. This will allow you to budget and set aside the appropriate estimated amount you’ll need at tax time. The plus to renting your property is that that someone else is paying the mortgage and is building equity for you. And the longer you own your rental, the more equity is built. Amortization rates will also work in your favor. Maintenance and improvement expenses and “depreciation” may be deductable on your income tax return. This is not something available to resident home owners. Another big positive is that prices of homes have been rising, and many experts believe prices will continue to rise for the foreseeable future. Also, there is currently a severe shortage of available rental properties. While figuring out your budget, here are a few items to consider. Each time you get a new tenant, you will need a new Certificate of Occupancy. Town regulations vary, but many towns require a fresh coat of paint throughout. Many towns require the landlord to register as a landlord. When a tenant vacates the property, it may be vacant for 1, 2 or more months, During that time, no income will be coming in. And if you use your Realtor to find the new tenant, usually the first month rent goes to the Realtors as their commissions. So, carefully calculate what you estimate the annual rental income will be. Then deduct estimated expenses. Then have your Realtor give you an estimate of what the property would sell for, and how much you would net. If the net income is more than you would get by selling and investing the money, you may be a good candidate to become a landlord. For more info, contact Bunny or Art Reiman, or visit our web sites www.55PlusInOcean.com , www.55PlusinMonmouth.com , www.BunnyandArt.com |