Selling a home seems easy, especially when the market is hot. However, there are a variety of factors that impact the entire process. For instance, an overvalued home won’t sell easily, and if there are too many problems, even a discount isn’t enough to make some buyers jump.
If you’ve been struggling to sell your property and tried everything you know, consider making it a rental. Rental properties are an excellent way to generate long-term income that can be used for retirement, travel, starting a business, or enjoyment.
There are some pros and cons to being a landlord. However, sometimes the benefits outweigh the costs.
When your home isn’t selling, here are five reasons to consider taking it off the market and making it a rental property instead.
1. Regular income
When you choose to rent your home, you’re establishing a source of long-term regular income from rent payments. Once your mortgage is paid in full, the rent you receive will cover expenses like property taxes, maintenance and repairs, and other costs related to owning a home, and the rest will be pure profit.
Is it worth the wait to become profitable? Successful real estate investors say yes. It’s not a short-term strategy, but if you’re willing to wait for results, it’s worth doing.
The rent you get from your tenant will either offset or cover your mortgage payment, depending on the market. If you can charge at least the same amount of rent as your mortgage payment, that’s ideal. Some property investors net between $100 and $200 extra per month in rent even before their mortgage is paid. However, remember that this won’t be true profit until your mortgage has been paid off. You’ll still have to pay your usual expenses in the meantime.
2. The sale won’t cover what you owe
If your sale price won’t cover the amount you still owe on your mortgage, that’s one of the best reasons to rent your home. There’s no good reason to put yourself into more debt when you can turn the situation into something that will bring you income long-term. You just have to be willing to wait long enough to see those profits.
Many people in Houston have made a fortune in real estate, so it’s a tried and proven source of income. If you’ve ever considered getting into real estate – even briefly – now you have a good reason to try it out.
3. Tax benefits
There are a ton of tax benefits for owning rental properties, like mortgage interest, depreciation, and even breaks on repairs, maintenance, and property management fees. However, you’ll need to consult with a licensed CPA to find the tax benefits that apply to your specific situation.
Here is an overview of some tax benefits you might qualify for:
- Depreciation. According to Investopedia, most residential properties depreciate at 3.636% per year for 27.5 years. This only applies to the property, not the land.
- Repair deductibles. You can deduct most, if not all of your repair and maintenance expenses, like painting, fixing a busted pipe, replacing a broken closet door, and fixing a hole in the wall.
- Avoid the net investment tax. You can use losses to avoid paying the 3.8% net investment tax if you generate income from your property.
- Mortgage interest deductions. The amount you can deduct varies based on when the mortgage was taken out and several other factors, but it applies to a lot of people. It’s worth asking about.
There are other things you can deduct, like property tax payments, travel expenses related to maintaining your property, and more.
If all of this sounds way too complex to manage on your own, you’ll be glad to know that you can hire a CPA to handle it all for you. If you’re also working with a property management company, they’ll provide you with all the paperwork necessary to do your taxes right. Some companies even have their own CPAs on staff, so you may not need to hire a separate company to prepare your taxes.
4. You’ve been wanting to try real estate investing
If real estate investing has been on your list for a while, not being able to sell your home could be the push you need to get started. Take the opportunity while it’s being presented to you. You already know the potential benefits of owning rental property, so dive in and take advantage of the situation.
5. You’re looking for a business idea
If you’ve been trying to come up with a good business idea that doesn’t require a large amount of investment capital upfront, renting out your home could be the answer. Why not turn your property into a source of income? Since you already own the property, you won’t need to come up with initial funding; you’ve already made your down payment.
Compared to starting another type of business, turning your existing Houston home into a rental property will have fewer costs. When you already have the asset (your home), it’s easier to create a business.
Like any business, you’ll still have expenses and responsibilities, but if a lack of investment capital has been your barrier, consider renting your home. You might decide to buy several more rental properties and start a real estate investment business once you see what’s involved.
Don’t want to be a landlord? We’ll manage your property
If the idea of renting out your Houston property sounds great, but you just can’t get behind the extensive work and tedium involved, we’re here to help.
At Green Residential, our team of professional property managers will take excellent care of your rental units and tenants. We’ll do everything for you, including tenant screening, background checks, income verification, rent collection, official notices, lease signings, vacancy marketing, showings, and more.
The longer your home sits on the market, the less likely it is to sell. Don’t waste any more time. Contact us right now about turning your home into a professionally-managed rental property. We’ll help you every step of the way.