| To rent or to sell? That is the question many | | | | do if you end up with a deadbeat tenant? Some |
| homeowners face when contemplating the option | | | | areas take months to evict a deadbeat tenant. |
| of owning an income property. Before you | | | | Will you hire a property manager or handle |
| decide to officially become a landlord, here | | | | the property yourself? If you plan to live |
| are a few things to consider while you make | | | | more than an hour away, you might want to |
| your decision. | | | | consider turning over some of the hassle to |
| | | | someone else. For example, if you live in San |
| The very first factor to evaluate is whether | | | | Diego but your rental is in Laguna Beach, it |
| or not you can afford to own two properties. | | | | will be a serious pain to drive all that way |
| You may be able to refinance your old home or | | | | to show the property to prospective renters. |
| borrow against its equity in order to come up | | | | But be careful! Some property managers charge |
| with a down payment on your new one. But, | | | | ten percent or more of the property's monthly |
| once you officially own both properties, you | | | | rent. |
| will incur expenses that you might not | | | | |
| expect. | | | | If you choose to sell, current tax laws offer |
| | | | you a window of opportunity to avoid paying |
| For example, there will be times when there | | | | taxes on the gains from your former home. If |
| are no tenants in your rental property. No | | | | you lived there for any two of the previous |
| matter how consistent your tenants might be | | | | five years, you can sell a home, even if it |
| there will come a day when you just can't | | | | is currently used as a rental property and |
| find a renter to save your life. | | | | any gain on the sale of the house is excluded |
| | | | from taxation. The limit is up to $500,000 |
| Also, you will have repairs; which are not | | | | for married taxpayers filing a joint return |
| always as easy to plan for as you might | | | | and $250,000 for single people. You will, |
| assume. What happens when one of your tenants | | | | however, still be responsible for the home's |
| decides to leave the bathtub running for a | | | | annual property taxes. |
| few hours on accident? Or worse yet, what if | | | | |
| they turn off the heater in the middle of | | | | Being a landlord may be a serious pain, but |
| winter, go out of town for the weekend and | | | | it also brings in extra revenue each month. |
| let the pipes freeze and burst? Sure, you'll | | | | It's up to you to decide whether or not you'd |
| plan for the occasional coat of paint or | | | | like to venture into rental property waters. |
| garbage disposal repair, but oftentimes | | | | Even if you try it and decide it's not for |
| repair bills come in much higher than you | | | | you, you can always sell the property and |
| budget. | | | | walk away without having to pay a heaping |
| | | | amount of gains taxes. If you are serious |
| You'll also want to think about other factors | | | | about the endeavor, talk with an experienced |
| that are out of your control. What will you | | | | real estate agent about your options. |