Don’t Sell The House!! Rent It
It seems good to sell a house while moving to the next but there are other better options to consider while moving to a new home for any reason. Rental homes are excellent passive incomes. Passive incomes are a source of building financial independence. Most of the times it is a very successful attempt. Not everyone buys a house to rent it later. It should be kept in mind that every house cannot make good rentals and not everyone can become competent landlords. Before going for renting a house the following facts should be thought about thoroughly.
Fit to be landlord?
There are people who after becoming landlords find out they were not fit for such a position. Being a landlord demands a lot. On the top of it are diligence and persuasive mind. Emotionally strong enough to tackle sob stories but still able to manipulate tenants to pay rents in a given time. It is easy to say that handling such issues is no deal but in fact it is. Tenants can give the landlords really hard time. Pushing them to their limits is normal by the tenants. Handling tenants with authority seems easy but it can be challenging. Students, single mothers and tenants suffering on jobs can have so many stories to tell the landlords to hold filing for eviction. These stories are sometimes true and sometimes not. Moreover, people prioritize their bills based on the consequences that might occur when paid late. There are two options when someone is late on payments, a late fee or filling to begin eviction process that takes months to complete.
Will the property produce adequate cash flow?
Such questions require some calculations and market research. Running a fully functioning house has a lot of expenses. These expenses can include interest, mortgage payment, taxes, insurance, property management and maintenance. The 50-percent rule states the expenses consume 50 percent of the rent. Tis does not include any financing that is being paid. Everything should be pre-calculated before setting the rent and passing the house to a tenant. The expected rent of the property, the average vacancy rate, maintenance required within some time and things that need to be replaced etc. Management fees are also included if the landlord plans to manage the property by himself.
Is it good enough?
After calculating the closing cost of the house and the annual return if it is put on rent it should be decided which option is preferable. Depending upon the structure and facilities of the house the and the location of the house, the rent should be set. People who don’t buy houses to rent them later usually go for dream homes with luxurious services. Such houses have high maintenance cost and tenants do not go for such options. The rents of such homes are high and tenants would not want it. All these calculations teach us if we should rent it or sell the house and buy another for renting. Because no matter what, renting is more profitable.
Buying better performing rentals
Just because the home you are leaving is not good rental does not mean there are no chances of you being landlord. It is highly likely that one sells a single-family home and buys a multiplex in the most wanted area. The cash flow increases by folds and so does the annual return. The seller should run all numbers and make the best out of their situation. If not able to manage the property by themselves, they should hire a property manager to work in their stead.