It's not uncommon for home sellers, especially sellers looking to move up, to ponder whether or not they'd rather just sell their current home or turn it into an investment that they rent out to someone else.
Some benefits of becoming a landlord
Your home goes from being a roof over your head to an investment, which if handled properly, can provide some nice coin for you throughout the life of the investment.
You don't have to go through the time, cost and hassle of selling your current home. (Yes even as a real estate agent I'll be the first to tell you selling your home is NOT cheap, easy or stress free - I like to think that I do whatever I can to minimize these costs but I know first hand what a pain in the rear it is to have your home on the market.)
If you're concerned about a soft market for sellers you can reap the benefits of
A. holding on to your current home until it appreciates more and
B. buying a home you really want now and take advantage of a buyer's market.
Some costs of becoming a landlord
You may not be able to rent your home right away so you'll be paying 2 mortgages or you may rent right away but find yourself tenantless (is that a word?) somewhere down the road and again, have to bear that cost.
There is always the possibility that you can run into some seriously bad apples as renters. They can stiff you on the rent, tear up your house and just cause all kinds of problems you never anticipated. On top of all that, some states make it extremely difficult to keep a tenant's deposit - yes, even when they have wreaked havoc on your home.
Realize that if you do rent out your home and then decide to sell later on, you may be subject to capital gains tax. If it's not a primary residence for at least two years (within a 5 year period) and if your gains are more than $250,000 for an individual or $500,000 for a couple you may be looking at paying capital gains tax.
Further Research
Becoming a landlord is a huge undertaking and while I certainly don't discourage it, I urge you to thoroughly educate yourself before jumping in. I am currently in the middle of reading these 2 (what can I say, I'm easily distracted) great books:
The Wall Street Journal. Complete Real-Estate Investing Guidebook by David Crook
The Millionaire Real Estate Investor by Gary Keller
Granted, they're not strictly based on being a landlord but they have a lot to say on investing in real estate which I think is important to learn whether you're renting out one home or 10 or even an entire apartment complex.
Finally, have a chat with your accountant, your insurance agent, your mortgage broker and possibly a lawyer to make sure your backside is covered (from several different sides!).
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