Approximately one-third of Americans rent out their home.
When it comes to renting out your home, there are a lot of things to consider. You might be wondering if it’s the right choice for you and your family. In this blog post, we will discuss seven benefits of renting out your home that might make the decision a little easier.
Keep in mind that each situation is different, so be sure to speak with an accountant or real estate agent to see what would work best for you!
1. Renting Out Your Home Can Help With Cash Flow
Because you have attractive loan terms and have resided in the property for a few years, you should be able to generate some monthly cash flow because you’ve paid down your mortgage – at least partially.
A couple of extra hundred dollars each month could help with things like groceries, travel, or even a new car payment.
2. Renting Out Your Home May Qualify You For Tax Deductions
When you own and rent out a property, there are a number of expenses that you can deduct from your taxes. These may include mortgage interest, property taxes, insurance, repairs, and more.
Even if you aren’t making income on the property, these deductions can still apply. Selling a house also comes with capital gains tax, which is a hit you might not want to take on your tax returns right now.
Speak with your accountant to see if you qualify for any deductions.
3. Renting Out Your Home Could Help With Mortgage Repayments
If you’re renting out your home, the rental property income can be used to help make your mortgage payments each month. This is especially helpful if you’re in a situation where one breadwinner has lost their job or you have other financial obligations.
It’s particularly appealing if someone else is paying off the mortgage for you while you live elsewhere!
4. Renting Out Your Home Can Help You Learn How To Manage An Investment Property
If you’re thinking about purchasing an investment property in the future, renting out your home can give you a crash course in property management.
You’ll learn how to be a landlord and deal with the issues that can arise with that.
When you rent your home you can expect to deal with things like:
- Rent collection
- Lease agreements
- Maintenance and repairs
- Dealing with difficult tenants
While it can be a lot of work, it can also be a great way to learn about what being a landlord entails.
5. Renting Out Your Home Could Serve As A Security Blanket
In today’s economy, nothing is certain. If you’re worried about job security or the stock market, renting out your home could give you a little peace of mind.
While rental income isn’t guaranteed, it could help you stay afloat if you find yourself in a difficult financial situation.
Additionally, the home is also there should you need to move back in for any reason. New jobs, new relationships, and moves can unfortunately not always work out. Having something to go back to can make that transition easier.
6. Property Values are Increasing
The property market has steadily ticked upwards over the last several years and experts predict that it will continue to do so.
In fact, American property prices grew 17.1% YoY as of December of 2021.
This is good news if you’re thinking about renting out your home as an investment.
You can hold the property now and reap the benefits above. Then you have the flexibility to sell at a time that is most beneficial to you.
7. Renting Out Your Home Gives You Diversified Investments
If you’re relying solely on the stock market for your investments, you may want to consider renting out your home as a way to diversify.
Diversification is important because it helps spread out your risk. That way, if one investment takes a hit, you have others to fall back on.
What to Consider When Renting Out Your Home
We’ve discussed the benefits of renting your home out above. Before you decide to rent and make the commitment there are some crucial factors to consider.
Landlords need to be prepared to deal with problem tenants, maintenance issues, and the day-to-day management of their property.
You should also speak with your mortgage lender to see if renting out your home is allowed in your mortgage agreement. Some lenders have restrictions on this.
Additionally, check with your insurance company to see if your policy still covers the home if it’s being rented out.
You’ll also need to determine if you’re comfortable renting out your home and having strangers live there.
Weigh the pros and cons carefully before making a decision. Renting out your home can be a great way to generate some extra cash each month, but it’s not for everyone. Those that do rent though can earn great passive income and experience from it.
Do some research and speak with experts before renting out your home. It’s an important decision and one that shouldn’t be taken lightly.
Should You Rent Out Your Home?
The million-dollar question. We’ve discussed the benefits and your property options, but ultimately it’s up to you to decide if renting out your home is the right move for you.
If you’re on the fence, consider speaking with a financial advisor to see if renting out your home is the right choice for you. They can help you weigh the pros and cons and figure out what would work best for your situation.
If you liked what you’re reading check out our Finance section for more information.