Rent your housing option
As the economy continues to struggle, more and more homeowners are considering selling or renting their homes. In most cases, selling the house means moving. However, for various reasons, many people choose to rent their homes rather than sell them.
In certain cases, people are aware that they have to take a year or two off while studying for a degree or taking on a specific job. There are times when a seller simply cannot sell at what is considered an acceptable price, so they prefer to hold out until the market recovers. Others simply want to keep their homes until they are sure they are not coming back. Whatever the reason, it’s vitally important to have a good understanding of financial concerns when weighing your decision. For most homeowners, renting a home is simply not a good option because they have to sell it to raise the capital, which is necessary to purchase a new home.
Here are some advantages or disadvantages of renting your house that you should consider:
Rental advantages:
1. You can keep your home as it looks.
2. The tax breaks you get could offset the income tax on the rent.
3. Rental income covers taxes, mortgages, and insurance payments.
Disadvantages of renting:
1. Tenants could potentially damage your property.
2. Rental income may be taxed on the entire gain if you sell.
3. Possibility of financial or legal problems with tenants.
As you know, the government provides a generous tax benefit for those who have lived in their homes for two years or more. Married couples filing jointly could enjoy up to $500,000 in tax-free capital gains, while singles can enjoy tax-free gains of up to $250,000. However, the good news when you rent your home is that you will still be eligible for these breaks as long as you have lived in your home for at least two of the last five years.
When you rent your home, you can deduct virtually any out-of-pocket expenses related to managing and owning the property, including property taxes, mortgage interest payments, and other expenses such as broker or advertising fees, repair costs , maintenance expenses. such as cleaning services, utility and management company expenses, civil liability insurance, fire and even travel and local transportation expenses incurred in maintaining the property and collecting rent.
Keep in mind that becoming a landlord is not for the faint-hearted. Being an absentee landlord is not difficult unless you hire or ask someone to monitor your property. If you’re willing to split ten percent of your monthly rental income, you may choose to hire a property management company to do the work for you.
Look at your house as an investment and think of it as part of your portfolio as a whole. If you plan or want to move back to the same area in a few years, you could be out of the market if you sell your home. Therefore, it would be more sensible to rent your house.