The act of renting homes out has become increasingly popular, and it’s quickly taking over the housing market.
If approached correctly, renting out your old place while you move into a new primary home can pay huge financial dividends, as well as other benefits. However, establishing a rental property requires a lot of planning and continued attention, so you need to be sure you can handle the added responsibility.
Here are some various factors to consider.
What to Think About When Considering the Development of a Rental Property
Your first move when considering rental plans should be an honest assessment of your current financial situation.
More often than not, people opt to sell their home because it allows for more flexibility when purchasing a new one. Sometimes a sell is downright necessary. If you can confirm that you won’t need the added equity immediately, then renting is a reasonable prospect.
Additionally, you’ll need to consider the expenses associated with your circumstances. Will your mortgage payments, maintenance costs and taxes offset the value gained through renting? If you’re worried about taking significant losses in the future, you might want to consider selling outright.
Perhaps the biggest question is the most obvious: Do you want to be a landlord?
Being a landlord requires that you screen your tenants, regularly collect rent, hold them legally responsible for potential issues and answer their needs promptly. There will be a fair share of headaches involved, and it will be up to you to determine if they’re worth it or not.
Which Homes and Mortgages Make Suitable Rentals?
Of course, personal questions aside, you’ll also need to contemplate whether or not your house’s external factors constitute an attractive place to rent. Homes that typically rent well include:
- Homes in safe locations: People want to avoid crime and depressed areas, and demand for these properties is low. If your home sits in a nice neighborhood with friendly people and walkable streets, you’ll stand a much better chance.
- Homes close to amenities: When people search for a place, they don’t want a rental home located 30 minutes away from town in the woods. They want to be reasonably close to shops, their job, gas stations, grocery stores and entertainment centers. If you’re a quick five-minute drive from some of those places, you’ll be in good shape.
- Homes that can fetch acceptable rental rates: Do some research to find out what the prices are for rental properties that profile similarly to yours. That will give you an idea of what you can charge on a monthly basis, and you can factor that number into the rest of your expenses.
You’ll also want to consider what kind of mortgage you’re currently operating under, including:
- Owner-occupied mortgages: These loans are generally the most popular kind. They’re intended for primary residences, and you must live in the property for at least a year before you can legally transform it into a rental property. As long as you meet this requirement, you can change without penalty.
- Non-owner occupied mortgages: These mortgages apply to rental properties, and you can switch freely between residential and rental. You’re free to change back and forth with no repercussions.
Second-home mortgages apply to properties that people use to purchase a secondary residence. These loans do not allow the owner to convert the house into a rental property, therefore making any thoughts of doing so moot. If you try, the lender may call the loan in immediately.
CENTURY 21 Core Partners Can Help With Selling and Renting
If you require a consultation to find the best real estate decisions for you, CENTURY 21 Core Partners can assist you. We provide services throughout Central PA and Northern MD, so contact us today with your questions and requests.