Keeping it in the Family: Why Renting Out a Home Makes Sense
While many families might consider selling as the obvious solution when upgrading to a bigger house or simply scaling back, there are convincing arguments as to why you should hold on to an old family home just a little longer. Based on real estate trends for 2018, inventory of homes for sale is still low which pushes up prices. The median value of homes is at their highest at $200,000 up by 7% from last year according to Zillow. There are more US tenants now than at any other time with 36.6% of households headed by renters in 2016, a figure that is comparable to the 37% in 1965 according to a Pew Research Center Report. Rising home prices, fear of a real estate market crash and debts are some of the reasons why renting is appealing over purchasing a home.
Source of Income
Investing in a property and renting it out brings in a steady income provided you have a reliable tenant. A realtor can help weed out the good or bad tenants including assessing their capability to pay by looking at their incomes which should be 3 times the expected rental price. In a similar fashion, taking out insurance against rent is also going to protect homeowners from defaults or late payments.
Helps with Mortgage Payments
If you still have an existing mortgage on this property or the new one you have bought, renting your place can help with repayments. It is, however, important to do the maths before deciding on renting out your family home. Calculate if the rent you charge (usually between 0.8%-1.1% of the home value according to Smartasset.com) is sufficient to cover mortgage payments after deducting maintenance or repair expenses, vacancy costs and any tax that you might owe the IRS.
A Place to Come Back to
A family home has a sentimental value for it is where you probably grew up or raised a family. It is something that you can pass on to your kids and family members when the time comes. If you must relocate for work purposes but intend to come back, renting the property rather than selling makes sense. Your property is also an investment. Over time, its value increases with some remodeling and because the inventory of houses in the next five years is still low. Plus, you don’t have to worry about capital gains tax for as long as you have lived in a primary residence for at least 2 of the 5 years before you sell it.
There are several arguments why you should consider renting a family property instead of selling it. You stand to gain from a low inventory of houses making it easy to rent your home for profit. Best of all, you always have a place to come back to and an investment that you can cash in later when the time is right.