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Why Renting Your Home May Be Smarter Than Selling During the COVID-19 Pandemic
When the COVID-19 pandemic started spreading throughout the US, the main concerns on all of our minds were how to prevent the spread of infection and what impacts it would have on a financial level. Now that the economy is starting to reopen, it’s clear that these concerns will continue. And if you were planning on buying or selling a house this year, you’re probably wondering where the housing market falls in all of this.
Despite the uncertainty, some analysts predict we won’t end up with a housing market crash like in 2008. This is great news for homeowners, and if you’re buying a new home now, it’s one reason why it may be smart to keep your old home as a rental property. Consider these questions, and our tips for converting your property into a rental, before taking that next step.
How strong is your local rental market?
The first thing to do is look at how strong your prospects are for generating income through the property. As with buying or selling a home, the demand for rental homes varies based on your location. However, national trends indicate continued demand for rentals, along with rent prices that are consistent or even rising right now.
Another thing to keep in mind is that the stock market is highly volatile, and as Real Wealth Network explains, owning real estate is often a safer way to protect your wealth. As a landlord, you can generate extra income to help cover the cost of your new home. Additionally, you’re making a long-term investment as the value of your current home appreciates over the years.
How will you finance your second home?
One option is to refinance your current property in order to access the equity in it for a down payment on the new one. Either way, you’ll need to budget for a down payment, mortgage payments, and all other costs of homeownership, like taxes and insurance. In addition to expenses, be sure to estimate income potential too, including rental income and the tax advantages you get from owning an income property.
When it comes to your mortgage, the most important thing is to research your options so you can be sure you’re getting the right loan for your circumstances, as well as a good interest rate. The most common type of mortgage is a conventional home loan, which is often the best option because these loans offer so much versatility. Conventional loans can be used for second homes, and you even have flexibility in how much you pay down and the type of interest rate (fixed rate, for example) you choose.
How much work is needed to prepare for tenants?
Getting your home ready to rent is similar to getting ready to sell. However, this doesn’t mean you should spend a fortune or make top-of-the-line upgrades. In fact, small upgrades can make a huge difference in helping you attract and keep good tenants. The first thing you should do is make repairs, especially if anything in the home is damaged or poses a health or safety risk. Then turn your attention to projects that improve your home’s appeal. For example, just as updated kitchens and baths help sell a house, the same holds true for getting one rented.
Easy landscaping projects will make your home stand out too, and these don’t have to be expensive or time-consuming! As with any upgrades you make inside, you should aim for projects that boost your home’s appeal without over-improving (or overspending).
When you bought your home, the decision was probably emotional and practical. Becoming a successful landlord requires a shift in your mindset, from homeowner to investor. This is why it’s important to set a strict budget, run all the numbers, and make a solid plan for managing the rental. Not every homeowner wants to be an investor, but for those who are willing to make the effort, this may be the most financially sound option in an economy that’s far from normal.
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