If you have a piece of residential property that is lying around and you are considering selling it, you should think twice. In many situations, keeping the property for yourself and renting it out can carry a bigger benefit for you than selling it would. You should weigh each side carefully before deciding to sell your property. This article looks at the advantages of being a landlord.
Income from Rent
The first step in the inquiry is to calculate how much you can charge for renting your property. In most situations, you need to sit down and figure out what amount of rent you need to break even and also produce some income for yourself. At the same time, you also need to be aware of the rental prices of similar properties in the same area as your house or apartment. You should look through classified ads, make appointments to meet landlords and also visit the other rental units to see their condition.
You cannot count on having a stable income from your rental property for all twelve months of the year. Residential lease agreements typically last a year or longer, and even if your house or apartment is in a high demand area, there is still going to be transition time between tenants. This transition time is typically one to two months, depending upon the condition of the apartment when the previous tenant moves out and how quickly you can find a new tenant. There may also be times when your rental property may stand vacant for a longer period of time. For instance, if the rental property you are trying to lease out is a luxury home, your asking price for rent will understandably be higher, which leads to a smaller base of people that may be interested in your property.
Another misconception that many people have entering into the residential rental property business is that not all of the rental income is profit. You need to be sure to calculate in factors such as property taxes, mortgage payments, and whether or not you are going to include utilities in the rental price. There are other issues that must be accounted for as well, such as whether or not you are going to deal with the tenants personally, or if you want to hire a property manager. Lastly, because of the nature of rental properties and landlord responsibilities, you also have to make sure that the place is in good maintenance, which means additional costs if the rental property is older and needs repairs to make it habitable.
It is pretty clear that, in order to make sure you do get an income from your rental property, you will need to sit down and carefully go over the numbers. After you have figured out your total annual costs on the property and subtracted that from your projected rental income, you will find your annual profit. If you appear to be coming out ahead by $100 to $200 a month, then you are within the industry standard. If it looks like you will be coming out behind, then the only reasons you have to hold on to your property is to wait for a better time to sell it at a higher price.
Tax Benefits for Owning Rental Property
In its current form, the tax code is full of laws that only serve to benefit people who rent out residential properties. One of the advantages of being a landlord is the ability to take numerous deductions, many times after ending up with a net loss from their rental income. This may sounds like a bad thing, but you might be able to deduct this net loss from other sources of income, like your wage income from employment.
Here is a list of some of the major tax deductions that may be available to residential landlords that do not own large numbers of properties:
This list is not exhaustive, though, so be sure to check with a tax expert to learn more about landlord tax deductions.
You're Not the Boss of Me
One of the great advantages of being a landlord is simply being your own boss , with opportunities to grow. Many people that get started with just one rental property often find themselves buying and renting out more properties, ultimately ending up as full-time real estate investors. The independence of being your own boss, setting your own hours and goals is a major draw for many people. So, before you sell your residential property, consider being a landlord and what opportunities might await you down this path.
Get a Free Evaluation of Your Law-Related Landlord Concerns
When you decide to rent out property, you're essentially starting a small business; which means you assume certain liabilities along with the advantages of being a landlord. If faulty wiring causes a fire in one of your apartment units, you could be held financially liable for any damages. Make sure you understand your liabilities and responsibilities before getting into the business; contact a local landlord tenant law attorney for a free legal evaluation today.