I have had two separate discussions with two separate clients in one day about this. So it’s worth writing about. Work is requiring that they relocate and they are considering selling or renting their home. While this decision may seem simple it is not. A variety of factors have to be considered – including financial and regulatory considerations as well as impacts to your quality of life.
Financial considerations include whether your home has sufficient equity to sell or whether the rent will be sufficient to cover the mortgage. Do you have money to bring to settlement if your home does not have sufficient equity or do you have extra money per month to cover any shortages in rent or expenses for maintenance or repairs? If your home will not sell for a price that you deem satisfactory would it result in a positive cash flow as a rental? You should make it a point to speak with your accountant or financial advisor regarding the implications to your bottom line. Moreover, in MD, if you rent your home, you will lose your homestead tax credit and as such your monthly payment will increase. Another unknown fact is that If you move out of state and sell a non-occupied home you will be taxed on the proceeds from the sale of your home. Currently (2013) that tax is 7%.
Regulatory requirements include registering your home with local jurisdictions and adhering to Maryland Department of environment rules for lead paint. If you do not adhere to these regulations you will not be able to evict tenants.
As an owner of investment properties I can tell you from first-hand experience that at some point you will run into issues with your tenants that will cause frustration in your life. If you do not want to deal with those issues then do not rent. On the other hand owning real estate is probably one of the best ways to build wealth if done correctly. Do appropriate background and credit checks and make certain that your prospective tenants have sufficient income to not only rent your home but also to live their life and you should do fine.
If you would like help on navigating through this decision making process please feel free to call me or email me.
Published on 2015-06-29 14:22:57
