There are some things we all have in common - and this year, those things included high inflation and a shocking increase to the cost of living. At the same time, home values have increased, bringing property taxes along with them. In this climate, what should you do with your real estate in this environment?
There are two main ways for homeowners to get value out of their current properties:
1) sell the home and pull your equity out of it, or (less conventionally),
2) convert your primary residence into a rental property.
Does the thought of a rental make your eyes glaze over?! Before you reject the thought, take a moment to consider how simple it could be...
While every situation is different, the very first thing to do (if your home isn't paid off) is talk to your mortgage company. There are some technicalities between personal and investment property loans so it's good to get those questions answered right away. You'll also want to check into the local laws and HOA rules to make sure they allow you to convert your property into a rental. And you also have to live in the property for a minimum of 12 months before you can turn it into a rental.
So why would you want to make your home a rental property? With rents on the rise, many homeowners have been surprised to find their mortgage is more than covered and they have excess income to invest in other ways.
Another consideration is the tax benefits you can use in your favor. Rental properties are treated much like businesses where you have both income and deductions. You can't take very many tax deductions when you live in the home, but that completely changes with a rental. In fact, all of the deductions add up and they can make your rental income completely tax-free.
On the flip side, there are some negative considerations if you're thinking about becoming a landlord... maintenance and serving your tenants can be a big drain on your time and energy unless you decide to work with a property management company. And no surprise, there are some tax disadvantages if and when you decided to sell. It's worth mentioning that you have the option of rolling proceeds from a sale into another investment property, but there are some stiff regulations to that process.
So is this the right decision for you? Should you consider turning your home into a rental property?
The truth is, every situation is different and it's always best to make an educated and well-informed decision. If this sounds intriguing and you want some other ideas or recommendations, let us know! The worst questions are always the unasked, so don't hesitate to send us an email or call for a conversation!
hello@searchyouralaskahome.com
907-830-3555
