The Rewards of Landladying

In my last post, I addressed the issues related to renting your home vs. selling the home.  While it may have seemed doom and gloom, there are valid reasons to rent as well-- In fact, it might embark you on a whole new career! Or at least another investment opportunity.

Reasons to rent:

1. When you owe more on your home than you think you can sell it for-- renting will buy you time.  It will keep you from taking a loss upfront. Instead, if you can rent for more than your mortgage payment-- enough to cover taxes, insurance, mortgage and an extra $50-$100 monthly for maintenance, then you are in business! Just make sure you do the math-- Rent must cover the essentials to make it worthwhile!
2. You are a handywoman or handyman-- this is a great outlet for your DIY-side!  If you enjoy working on projects, a rental provides you with that outlet as well as improving your investment.  Your skills will pay off with a well-cared for home that will make you money. (especially if you save on all maintenance costs!)
3. You love people.  You have the gift of gab-- you like meeting new people and figuring out if they will be good renters.  Not everyone can do this, so just like being handy-- you have a skill that can be channeled into making money for yourself.
4. You are looking for a new investment opportunity.  As we all know, bank interest is basically non-existent.  You might have money invested in 401ks, stocks and money markets.  But real estate is a nice addition to your portfolio.  Having a home that you consistently rent out will help establish credit for further bank loans.  If you live in another home that you own, you will essentially build equity at double the rate (two homes!)  Remember when Mom took you shopping and paid for your new shoes?  It is always a good thing when you buy something using someone else's money.  
5. Lastly, a real estate endeavor is a nice tax break.  Tax relief is getting hard to find-- so take it when you can!!  You will be deducting mortgage interest, insurance, property taxes and all maintenance.  If you set up an LLC (easy to do and worth the cost!), you will divert some personal liability and give yourself a reason to have a home office (deductible!) for which you may need to buy supplies and furnishings (deductible!).  There is also a cool thing called "depreciation" which will work in your favor for taxes.  It is a good idea to run the numbers by your accountant who can tell you specifically, based on your tax bracket/earnings, how this will impact your tax return.  

 
So there you have it-- five great reasons to get involved in real estate on a small scale.  If it works well and you like it-- opportunities will come your way.  Believe me-- that is how I started.  Just a handful of rentals grew quickly because the more I did it, the more people started to tell me of new opportunities, and the easier it became.