There are many reasons homeowners may find themselves in a position to rent and own at the same time.[find-an-apartment]
Some cannot afford to stay in their homes, but also can’t afford to sell when a depressed economy means the inability to get a good sales price.
Other homeowners find themselves needing to rent because they’ve moved for a new job, but still want to hang onto a home.
Whatever the reason, being both a landlord and a renter at the same time comes with complications. Here are five issues to consider when you both rent and own.
Being a landlord requires know-how and time.
Even though you may feel emotional about your home, it’s important to remember that renting out a home is a business transaction. Laws govern many parts of this transaction, including how you choose tenants — choosing them according to “gut feelings” alone typically isn’t legal, for instance.
Being aware of the proper, legal way to screen tenants is just one small piece of knowledge you need to have as a landlord. Landlords are legally responsible for many other duties including providing a safe and functioning home for tenants, being available to respond to the inevitable maintenance requests, and advertising the rental. If you can’t see yourself having the time, knowledge or patience to carry out these duties, then renting out your home may not be the right choice.
You might not make a profit.
Determining how much rent you can charge for your home goes deeper than merely totaling up the monthly expenses associated with the property. Rents are based largely on what the market will yield, so you’ll have to do research to determine what similar properties are renting for in your neighborhood before you can know if it makes financial sense to rent out your home.
Another thing to consider: you’re going to incur living expenses at your new apartment, too. So if you planned on covering the costs of utilities, cable or HOA fees at your home in order to sweeten the deal for tenants, you may only be breaking even — not turning a profit — by renting out your home.
Having other people in your home may make you, um, emotional.
If you plan on living in your home again someday, then screening potential residents is going to be very important. Every homeowner feels an emotional connection to his or her home, and choosing to let strangers stay in your home may be difficult. You’ll want to feel as if your tenants will respect and maintain your home. The process of selecting the best tenants may well be a challenging or even emotional process.
You need to understand insurance coverage.
But if you decide that you’d still like to rent your home out while you live elsewhere, there are steps you can take to protect yourself financially. Step one is to change your homeowner’s insurance policy to rental home insurance, which provides liability protection but doesn’t cover possessions (that’s OK, as your belongings won’t be in the house — your tenants will be required to buy renter’s insurance to protect their own things.)
There are other ways you can protect yourself financially, too. Check with an accountant to look for tax deductions.
You’re still on the hook for costs associated with your home.
As a landlord, you’ll also be responsible for covering certain costs associated with your home. Real estate experts say you can expect to spend about two percent of your home’s purchase price on routine repairs annually. You also have to pay taxes on rental income, though you can deduct mortgage interest, as well as insurance premiums and some other fees you incur to advertise or maintain your property. If you’re not prepared to cover line items like these, renting and owning at the same time may not be viable.
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