Renting vs. Selling Your Home

Occasionally a house just doesn't sell. You may have done everything correctly, but the market was simply unfavorable for you at that time. There's no need to give up on the property altogether, though. It might be worth your while to consider renting out your home as opposed to trying to sell it.

Being a landlord, however, can be a scary proposition for many people. You may typically think of a greasy and grimy individual (whose blue jeans are riding just a tad too low) that won't fix anything, but bangs on your door incessantly for the rent. Not all landlords are like that. Many are friendly, responsible people who respect and appreciate their tenants. If you choose to become a landlord, be sure to model yourself after the latter example.

Rental properties create cash flow. A solid, positive cash flow is determined to a great extent by the amount of the rent that the property brings in. The monthly rent you charge should ideally cover the property's mortgage payment and any incidentals. If it doesn’t fully cover those expenses, try to get it as close as you possibly can. Being on the hook for $100 a month is a much better situation than having to shell out the whole mortgage payment, even if you do still have a negative cash flow situation.

Although you're a landlord, it's not absolutely necessary that you handle every problem that comes up. As a matter of fact, you sit back and get paid by your tenant without having to deal with even one leaky toilet. Yes, you as a landlord are generally responsible for all repairs on your property, but you can hire a property management company to actually take care of those tasks for you. The company can also screen potential tenants, carry out repair orders and collect the monthly rent. If your plans call for moving to another state, having a management company is a great option.

Rental property is considered to be a real estate investment. Therefore, as an investor, a number of tax breaks become available to you. For one, you can deduct money for wear and tear of your home (also known as depreciation). Depreciation is only a paper deduction, since homes actually tend to go up in value over time – usually (witness the current housing market woes). A landlord can also claim a depreciation loss for appliances in the home. This can be done in one lump sum or spread out over a number of years. Any depreciation amount has the effect of lowering your taxable income. It's even possible to claim enough deductions to show a net loss on the property, even though you're receiving rental income each month from your tenants.

Renting or leasing your home could be the beginning of a whole new opportunity in real estate. As an investor, your properties will work for you to make money. Furthermore, you can use money that you made from one property to invest in another, thereby deferring taxes on that profit. Renting or leasing allows you to put off capital gains until the time that you sell the property, if you should ever choose to.

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