It's no secret that the real estate market has taken huge hits over the last few years. There's really no need to go into detail as we've all seen our property values plummet to the point where it doesn't look like we'll ever be able to move again. However, there are options out there and one of them is to convert your home to a rental which can make a whole lot of sense in today's market.
There are many good reasons to convert your home to a rental. One reason is you simply need to move because of a job or lifestyle change and in this case it could very well make good financial sense to hold on to your home as a rental property. Another reason is you want to move to a bigger (or even smaller) home and the local rental market for your current home is very strong. In this case, why not hold on to your current home and rent it out to make a few extra bucks every month. You may also have been thinking about purchasing rental properties and this is a great way to start building your portfolio and move at the same time.
So if you're interested in investing in rental properties and you own your own home now, why would you want to convert your home to a rental? Well there's a number of reasons.
1. You know the property very well since you've been living there for some time and you've taken very good care of it. When you invest in rental properties sometimes you inherit other people's problems and at least in this case you know what you're getting.
2. You know the local market around your home so it's going to be easier for you to find good tenants. Being a 'local' all those years and living in the city or town will definitely help you understand your target market and help you rent it for long term profitability.
3. Huge cost savings as you don't have to spend time hunting for a rental property. You'll also save tons of money as you don't have to pay realtor fees or closing costs since you already own the home.
4. Instant tax savings. The minute you move out and choose to make your old home a rental you can start taking those deductions on your tax return. From depreciation to expenses, you'll save a lot of money on your tax bill next year.
Many people who are forced to leave their homes make the mistake of keeping their homes in order for the market to rebound or for other wrong reasons. This occurs almost every day in those markets that have simply bottomed out and owners are stuck making two or more mortgage payments as they wait out the market. Bottom line is that no one wants to sell for a loss so they many times they keep the property and next thing they know they blew right through their savings and foreclosure is close on the horizon. Converting your home to a rental in this situation makes so much more sense and in the end it could be a solution to helping you financially and keep you losing your hat.
Keeping your home as a rental, though, must be made for the right reasons and the right term. Converting it to a rental only for the short term while you try to find a buyer or until you get back on your feet can also be a big problem. That is why we always recommend keeping your home as a rental for the long term instead. It may help pay the bills for a little while if you're going the short term route but if your heart is simply not into being a landlord you'll pay dearly down the road as you'll either have a problem selling with short term tenants or the tenants could even wreck your once nice home (as short term renters tend not to be the best tenants in the world for taking care of things.)
Bottom line is converting your property to a rental can make extremely good sense and can help build your investment portfolio over the long haul. But make sure you're doing this for the right reasons, study up on your local area to make sure the rental market is stable and get help from your accountant or another investor in the area who can help guide you through the pitfalls of being a landlord. You'll be happy you did.
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