5 Reasons to Rent Out Your Home

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Winter is here.  Spring is coming.  I sound like a Game of Thrones ad!

Seasons matter.  I love them all for various reasons - I love the freedom of summer, the crisp scents of fall, the cozy nights of winter, and the HOUSING MARKET in the spring.  

Okay, I also love the promise of new beginnings, budding flowers, and extra sunshine that spring brings.  However, I have to admit that I love the fun of house hunting in the spring.

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Even if I am not moving or buying a house, I am always 'house hunting'.  I love doing market research and seeing what is for sale, what has or has not sold, and what is hitting the market.  This used to be an "inexpensive" way to window shop; I wasn't able to just "buy a house" with a click of the mouse. However, since we started renting homes, it has become a bit more risky because I tend to fall in love with homes and now have a business that supports buying them!

With every spring comes change.  People often move jobs and locations along the timeline of school seasons and semesters, so that means people start to offer their homes for sale in the spring in anticipation of moving in the summer.  Therefore, the housing market is most active in the spring and houses tend to sell most easily during this time period. 

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Most people consider selling their home as their biggest obstacle in the their move, and that is for good reason.  It is a lot of work, time, and effort to sell your home.  There is a lot of mental and financial stress that goes along with all of that as well.  Obviously, there are lots of reasons to sell your home when you move, but some times, people overlook a great opportunity when they are moving.  That opportunity is a chance to rent out your current home.

The reasons to rent your home go far beyond this list and I will take the time to cover them in additional posts, but I wanted to share a few reasons that are often not even understood or known by the general public when it comes to renting your home.  There are some advantages that you might not have considered beyond the obvious ones that you probably have considered.  You can also create an opposing list of reasons to NOT rent your home.  That is also true.  However, that same thing can be said for any type of situation that has benefits and risks.  

So let's get down to it.  Here are five lesser known reasons to consider renting out your current home rather than selling it.  I hope you find this fun and a nice tool in considering whether or not to rent your home!

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YOUR LOAN INTEREST RATE IS LIKELY BETTER

Interest rates on loans for primary residences are almost always cheaper than interest rates on investment loans.  This means that you can rent your home with less cost than if you were to invest in a different home to rent.  Using an example, let's say your primary home mortgage is $250,000 and your interest rate is 3.50% at 30 years.  That makes your monthly mortgage payment $1123/month.  If you were to purchase this same home as a rental investment (aka, in addition to your primary residence), you would likely have a loan that was structured more like $250,000 at 4.75% for 30 years.  This would make your payment $1304/month for the same house.  That is already a difference of $181/month in cash flow and you have not had to do anything different.  That amounts to $2172/year.  Not bad.

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YOU ALREADY HAVE THE HOME

Securing financing for a rental home is time consuming.  Remember when you had to secure the loan to buy your home?  It's a pain, right?  Well, escalate that pain up a notch when you are buying an investment property.  There is even more paperwork, time and particulars involved, making the process fairly time consuming and more difficult.  If you already secured financing for your home (or even own your home outright), there is very little you need to do to change it to a rental home. 

YOU WILL LIKELY PAY LESS FOR INSURANCE

When you convert your primary home into a rental home, you change your homeowner's insurance policy to what is often referred to as a "fire policy".  This policy covers your home, the land, and the rebuilding cost of the structure.  You are no longer insuring your valuables inside the home (that will be the responsibility of the renter through their rental policy).  In our experience, a fire policy has generally been less expensive than a homeowner's policy.  That amounts to more money in your pocket again.

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TAX ADVANTAGES

This topic is broad enough to fill entire books on the subject, so I will gloss over this and keep it brief.  However, there are substantial benefits to renting your home.  In a nutshell, when you start renting out your primary home (which will now not BE your primary home and you are allowed to obtain a new one with the same lower financing as before - yay!), you will start making income from your renters.  However, any income you obtain will be offset against expenses incurred in owning your home (care, maintenance, repairs, and more).  Any improvements you make and or large repairs you make (like a new roof), can be expended as a depreciation expense (meaning you will be able to deduct these costs over each year you rent the home up to the usable life of the item).  You even depreciate the cost of the house structure.  This is all overwhelming to discuss, but know this:  You will be getting to deduct a lot of things from the rental income you make while also reducing the amount you owe on your home.  Therefore, you are getting to offset a lot of the income you are making, and your debt on the house is still going down.  Your home is gaining equity and you get to do it without a large burden of tax impact. That is a good thing. 

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LESS TIME ON THE MARKET SAVES YOU MONEY

In our experience, renting a home happens a lot faster than selling it.  You can complete the process in a day, in fact, we have often rented a home in a matter of hours.  That means, there is not a day that goes by that we spend money on utilities, mortgage payments, or property insurance or taxes in waste.  If your house sits vacant on the market while waiting to sell, you rack up costs pretty quickly in all these areas.  Renting a home is a less serious commitment for most people than buying one.  They are more readily willing to enter into an agreement and the coordination of the transaction is simpler.  Time is money.  Renting saves on that front.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
— Ayn Rand

Hopefully this was interesting and helpful to you in the process of considering home rental.  There are so many factors that go into the decision to rent or sell your home, and this is only a smattering of them.  Knowing your advantages, including more obscure advantages, can be helpful when it comes to making the decision to rent or sell your home.

Have you ever rented out your primary residence? What made you decide to do so? Did you decide to sell instead? Were you happy with your choice?  I would love to know!

- Casey