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Rent or Sell Your Old Home

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If you are planning to move out of your old home, you have a few options: you can sell it, rent it out, or leave it vacant. Since leaving a home vacant really doesn’t do anything for your wallet, your best bet will be to either sell or rent your home. Before making the decision, it is best to consider a few key factors first.   Naturally, if prices are skyrocketing and homes are not on the market for extended periods of time, then it would probably be best to sell in the future and reap a gain on your old home. However, if the market has excess inventory and it is a buyers’ market, you might want to consider renting it out.  Also, you can try using “capitalization rate” online calculator that will give you an assessment on the economic viability of renting or selling your property. And while renting your house is probably not going to make you millions of dollars, it will allow you to reduce your costs and hedge against a slowdown in your market. The following are a few tips and concerns if you are considering the new role of landlord:

  • Landlords are entitled to tax advantages on top of their regular deductions of mortgage interest and taxes.
  • Recommended that landlords budget 25% to 30% of the rent to put in a reserve for maintenance and repairs. This will leave you with about 70% to take as a profit and cover your mortgage and taxes. Ideally, you will have the renters pay for the utilities and insurance costs.
  • You should think about how much you will want to interact with your prospective tenants. A property management company will charge between 3-10% of the rent, but will act as your intermediary.
  • If you decide to go with a property manager, select and monitor them very carefully. If they commit a crime, you may be held financially responsible.
  • Payments must be made even if the property is vacant and repairs typically cannot be delayed if there is a tenant on the property.
  • State and local laws must be followed, with some municipalities requiring a certification for all owners of rental housing properties.
  • If the mortgage was originated many years ago, more of the payment may be being applied to principal and you will be able to build additional equity into the home.
  • Have the future tenants to fill out a rental application form, which will provide you with enough information to then conduct a background and credit check. These forms can be found online and make sure that you ask for permission before running the credit check. If they do not grant it you can always deny them the right to rent.
  • Once you have the rental application, hire a tenant screening company to carry out a background check on your applicants; this will cost between $20 and $50.
  • Ensure that you have a written and signed lease with your tenants that documents the important conditions and rules that will exist between you and your tenants, such how they will pay their rent, handling complaints and repairs, notice to enter the tenant’s apartment, and all other key issues that you will need to address. There are plenty of standardized PDF and Word Document templates on line that you can use as a boilerplate.
  • If you are renting out your property, make sure that you buy enough liability and property insurance in order to protect you from lawsuits by tenants due to injury, discrimination, and losses to your rental property due from fire, burglary, storms, and vandalism.

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