Waiting for home prices to go up again? Many homeowners are dismayed at the current market value of their home, especially of they had counted on a sizeable nestegg during the heydays of the California real estate market but were not ready to sell just yet. Now they need or want to move and the large chunk of cash they anticipated getting has diminished. In other instances the owners' equity has gone and they are at break-even or under water. A common thought is to rent the home while waiting for values to come back up. Homeowners who are considering renting out their home for a few years instead of selling should consider the points below:
- What needs to be done to the property to get it rent ready? New paint and carpet, or more extensive repair work? Cost?
- Who will manage the property? If the owners move away from the area, they need somebody to oversee maintenance or repair issues while the property is tenant-occupied.
- What is the true cost of carrying the house (mortgage, taxes, insurance, HOA dues, maintenance) and how much rent can it bring in?
- Tax implications of turning a primary residence into a rental unit. Long time owners who have accumulated appreciation need to be aware of the capital gains tax laws to avoid large future tax liability. This is the piece most owners don’t think about until they sell the property. Surprise!
- How will the owner find and screen the prospective tenant?
A knowledgeable Realtor can help answer these questions, direct you to ask your tax professional the right questions, and discuss the best exit strategy.