Should You Rent Out Your Current Home Instead Of Sell?

We’re just going to start this off with an assumption. Let’s assume that you have owned your home for several years. Because you’ve had it for so long, it’s increased in value, not to mention the unpaid balance is considerably less than you originally borrowed. To put all that into easier terms – you have equity in your home. And, you’re thinking of buying another home. So, should you find a replacement home before you ever put your home on the market?

That’s actually a great question that many should think of, but let’s throw a curve ball. There is another question you might want to consider asking, which is “Should I keep my current home and convert it into a rental after I buy another home?”.Believe it or not, that is not an off-the-wall question – it’s actually a quite good question! And the answer may have to do with your finances. If you can afford to do this, it may end up one of the better investments you’ve ever made.

Do you have enough discretionary funds for a down payment and closing costs for your new home?  Is it enough to put 20% down payment so you can avoid paying mortgage insurance?  Can you qualify for the mortgage on the new home with the additional liability of your current home?

You really don’t need to answer “yes” to all of these questions. No matter what, you can consider the possibility of converting your home into a rental property. In short, if you have good equity in your home, you might be able to pull part of it out for your down payment and closing costs – plus still have equity available for other needs. In most cases, lenders will make cash out refinancing for up to 80% of the value of the home.

Here’s another possibility – you may have borrow against your qualified retirement program. Now, the advantages with this idea would be speed and convenience (after all, it is your money!), good flexibility in regards to repayment and cost advantage. If you think that the stock market is moving downward, this could be an added incentive to earn more in the rental.

Seriously – rental properties are so attractive right now because rents are rising and are expected to continue to rise! There is a shortage of homes for sale, as well as a shortage of homes available for rent. When you factor collecting the rent, mortgage payments can become less, and expenses can result in a positive cash flow before tax.

Real estate professionals such as myself can provide information on the value of your current home, estimates for rental income and expenses and in finding your replacement home.  Talk with your tax advisor to see how this alternative would work for you.

For more information, download the Rental Income Properties and give me a call with any questions..

Ready to sell your home? Then we should talk. I’m always available to talk to you at 703-303-4010.

I can provide Insider Information on Fairfax VA homes for sale. Get you a FREE Market Snapshot Report of Your Northern Virginia Home’s Value, or  Search All Northern Virginia Homes For Sale. Put that data you need at the tips of your fingers!

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