Selling for a loss or should you rent your current home out?
I read a fabulous blog today by Margaret Woda - Ready to buy a home, but can't sell?. There are many ways to move if you have a need, but don’t want to sell your current home at a loss. Margaret touched on how you can get the money for a down payment for your next home without selling your current home.
Why is renting out your current home a good move? If you have to move out of state or go on an international assignment, renting might be a great option. Or, if you are out of space – you bought it when you needed less space and now you are bursting at the seams, but owe more on your mortgage than you could currently sell your home for, renting might be an option.
Consider some of the benefits of renting out your home:
1. If you sell your personal home at a loss, this loss is not deductible on your taxes. However, if you sell a home that is an investment property (which your home becomes when you rent it out to others) you may be able to claim a loss when you sell it.
2. When you own rental property you may depreciate the house (not the land) over 27.5 years on your annual tax return. This can be a nice tax advantage.
3. The rental market is strong in many markets. For Buckhead & Sandy Springs luxury rentals, there just aren’t enough good rental homes for the demand and prices are continuing to increase. We expect this to continue. So, your mortgage payment at a good interest rate might be able to be covered by your rental payment.
4. If you don’t rent the home out and sell it for a loss, you might have to use whatever savings you have to pay the difference in what you owe on your mortgage and the lesser sales price. This will negatively impact your cash on hand to buy the next property.
5. We’ve had a number of owners remark to us that renting out their home is one of the best investment returns they can get right now on their money.
6. Your first step should be to verify that your neighborhood HOA allows rentals and what the guidelines are. This is especially important for condo and townhome communities where there can be no rentals or limited rentals allowed.
Renting out your existing Buckhead home may or may not be a good option for you. If you need or want to move, it’s a great option to consider determining if it works for you. (Note: We are not advocating this if you are in financial distress.)
Tim Francis Realty has offered leasing and property managing luxury rentals in Buckhead and Sandy Springs Georgia for 10 years. Don’t hesitate to contact us or your local NARPM (National Association of Realtor Property Management) associate to discuss this option to see if it is good for you.
******************************************************************************************
Information and content on this blog is original to Michelle Francis
Michelle Francis
Tim Francis Realty, Serving Buckhead, Atlanta & Sandy Springs GA
(404) 219-9760
Want to know more about Residential Buying, Selling, Executive Home Leasing & Property Management in Buckhead, Atlanta and Sandy Springs, GA?
If so, you can find me here:
Michelle, excellent post that is absolutely true. Many owners are renting out their homes now instead of walking away or short selling. However, you make an exceedingly important point as well- if you have an HOA make sure you check that renting is an option before you move too far along in your planning.
I think rental is a great alternative, so as long as the person turning his/her home into one has surplus cash to sit on, and also monthly cashflow to pay for the mortgage if the tenant doesnt pay on time.
I look at rentals as an alternative solution to investments.
Great post. Another issue is property insurance on a VACANT UNSOLD home....Allstate is inspecting VACANT homes and is now requiring copies of renter's lease if property is not occupied within 90 days of owners vacating.
Happy New Year!
Michelle, some great points here and I agree with Wallance, the insurance issue can be a ery real one.
Mark,
Checking your HOA docs first is a key step. It may not be an option.
Loreena,
Yes, it really helps if you are in a stronger financial position to do this. There are folks I have recommended that they not lease out their home, as it could put additional financial strain on them if they are too close to the edge.
Wallace,
Yes, a vacant property is a major no-no for the insurance companies.
Janice,
We have one property when they just left the country, but their brother is staying over when he is town for business every mid week. It's a win-win for all until we have a good tenant.
All the best in 2012, Michelle
Tammie,
Very true, in the best case scenario the rental exceeds the monthly mortgage! Over time this really works out better, as rents typically rise!
All the best, Michelle