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Five Pros and Cons of Renting Your Home
It is vital to know the pros and the cons of renting out your home, and the effects it could have on your financial situation.
18:12 31 January 2023
It is vital to know the pros and the cons of renting out your home, and the effects it could have on your financial situation. Whether you have been living in your home for a while and it's time for a change, or you got a new job in another state and don't know what to do with the property.
Everyone's situation is different and this article will help you make a decision. At the end of the day the decision to either sell or rent out, should be based on your financial situation. Also there are all types of things you should know going into this.
For example, what is the demand in your area for rental homes or when was the last home sold in this area? Or, will you be able to receive a profit on this place when it's sold? Even before that getting your property list on mls can be worrisome. Luckily there are companies that take the stress away from you, with listing your property on MLS without the commission fees, or pricey real estate agents.
We start with some of the pros like receiving passive income and the possibility of building equity in your property. Next are the tax deductions that can be acquired if properly used. The cons include the nightmare of bad tenants and the unexpected cost that can occur in case of emergencies.
There is a lot of information we need to get to so let's get started.
1. Passive Income
Passive income is one of the main factors people use when building wealth. The ability to make money while virtually doing nothing is everyone's dream and it could be yours if you rent out your property.
Of course the amount you make depends on what your property is, and where it is located. Certain areas for rental properties are more coveted than others and can have a huge price tag.
The rent payments on the property of course need to be higher than the mortgage payments and other expenses, but it is possible. Commission fees often deter people from getting a real estate agent and this slowed the process down. Now there are options to get your list on mls without the heavy fees from agents.
2. Can You Build Equity?
The housing market is not always on a high note, sometimes there are down seasons. This makes it harder for you to sell your property. Although the market always comes back and the demand skyrockets for new properties.
If your property is in a coveted area the equity can build overtime to where you can keep renting it out or eventually sell it. The longer it stays there the more valuable it can become.
If you sell this property you lose a tangible asset that can be passed down to your future generations and build wealth overtime. You can look into this more by checking what the property values are around your area to get an idea of what the price may be.
3. What are Tax Deductions?
Tax deductions are an expense that can be subtracted from your income that can reduce what you pay in taxes.
There are numerous ways you can do this and you may have heard of a few. Usually the rich avoid paying taxes by giving away charitable donations. They donate money to a charity or charities and write them off to avoid paying some taxes.
You can also do this with medical expenses and mortgage expenses as well, there are many ways to have tax deductions. There are several deductions you can make as a rental property owner including repairs, maintenance, property tax and depreciation.
4. Bad Tenants
Yes, there are some great pros to renting out your property but the cons come on just as strong. Starting with the possibility of bad tenants. The tenant will be the person that is renting out your property for whatever extending amount of time.
There are dozens of ways you can have a bad tenant and this makes becoming a rental property owner a hassle. Someone who doesn't pay their rent on time, who doesn't follow the guidelines they are given, or one who constantly damages the property.
Finding the right tenant can be more of a hassle than getting your property list on mls. At the end of the day depending on the tenant you have it can put you back hundreds if not thousands of dollars and damage your return on investment.
5. Unexpected Cost
The bad tenant can coincide with the last con, with unexpected cost. No rental property owner wants to account for holes that are made into the wall. Or a tenant backed into the garage door and damaged it.
As the owner you have to fix these things because ultimately it is still your property. You also have to account for the things we can't control. Like the air conditioner going out, or if there is a natural disaster and it damages the house.
Unexpected costs should always be considered when wanting to start a rental property.
When making your decision it is important to look over the pros and cons of renting your home. You may receive passive income and build equity over time. Creating tax deductions may also be a plus for you as well. But, you have to consider cons like bad tenants and the stresses of unexpected cost.
Either way make sure you do your research before making a decision because it can cost you a lot of money in the long run.