Renting Out Your Home To Raise Capital
As I’m meeting more rental investors of late I thought I would look at the strategy of renting out your home to raise capital and thought I would ask the question “Can you turn your home into a rental?” There are many reasons why homeowners may choose to change their current home into an investment property. Working away seems to be a key component but sometimes people go overseas for an extended period and want their home to be waiting for them on their return, Or perhaps they simply see the financial advantages of holding onto a property when buying another. What are they?
Firstly, while most people have to take a larger mortgage when buying a second property if they don’t sell their current home, thereby increasing their interest payments, they don’t incur fees associated with selling the property. This may not seem like a lot of money in comparison to the value of the property but many investment strategists prefer not to sell any property once they have bought it. Once you have installed a tenant, the rental income derived helps pay off the mortgage and the interest repayments and any costs from repairs and improvements for the rental property are tax deductible. While many people are afraid of increasing their debt to buy a second property, it’s a very successful strategy for those with sufficient income to pay the increased loan – provided of course that the home they are renting out is sought after by tenants and will stay leased without more than the usual vacancy. It’s worth doing your homework with local real estate agents (make sure you talk to a property manager) to find out whether your property fits into the category of properties easily rented for a good return. (For example, sometimes homes that are very large don’t attract a rental income commensurate with their size if the typical tenants are a young professional couple and they can rent a property that is smaller but big enough for less.).
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