Should I Rent My Current Home?
Updated: Nov 12, 2020
"I'm selling my current home and buying a larger one for our growing family? Should I sell my current home or lease it out." It depends.
10 QUESTIONS TO ASK BEFORE RENTING YOUR HOME
How will this impact your taxes? If the house was your primary residence and the value has gone up, you may be able to exclude up to $500,000 of the taxable gain on the sale. When homeowners convert their primary homes into a rental, this important tax break may be reduced or eliminated over time.
Is the rental income enough to cover your carrying costs with a cushion for repairs and vacancies? If not, can you bridge the gap with your current stream of income?
How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations or COVID?
If you need to evict your tenant due to nonpayment, how long will that take? As of this writing, there are moratoriums in place to prevent a tenant eviction.
Have you discussed these possibilities with an experienced eviction attorney so you understand the risks and your options?
Will you allow pets? Cats? Dogs? How big a dog?
How will you actually collect the rent? By mail? Direct Deposit? How will you handle late payments?
Who will take tenant calls when necessary repairs come up? Will you need to hire a property manager? If so, be sure to factor in that expense.
Do you have a list of contractors readily available to handle these repairs?
How often will you do a physical inspection of the property?
Bottom Line Renting out residential real estate is historically a great investment due in large part to the combination of appreciating home prices and appreciating rents. However, it is not without its challenges and possible tax implications.
If you are specifically considering renting out your primary residence, please give me a call to discuss the special tax consequences. It may make more sense to take advantage of the capital gains exclusion and find a different rental property for investment.