By Vanessa Saunders CEO Broker/Owner Global Property Systems
High-interest rates can be challenging for many homeowners, especially if they want to downsize, move to another state with lower taxes, or upgrade their homes. Whatever is stopping you from selling at this time, becoming an accidental landlord might be a solution worth considering.
Accidental landlordship refers to the practice of renting out an existing home instead of selling it, which can be a great way to generate rental income and potentially increase your long-term wealth. Here are some reasons homeowners should consider becoming accidental landlords, even in a high-interest-rate environment.
Benefit from rental demand:
Despite high-interest rates, there is still a high demand for rental properties in many areas. By becoming an accidental landlord, homeowners can benefit from this demand and earn rental income while still owning their property.
Maintain ownership of property:
Accidental landlordship allows homeowners to maintain property ownership while also earning rental income. This especially appeals to homeowners with sentimental or emotional ties to their homes who don’t want to sell them.
Potential for increased income:
This depends on the local housing market and your specific situation. For example, if you own a home worth $500,000 and have a mortgage of $400,000, and the market rent in your area is $5,000 per month, after deducting your mortgage payment, property taxes, insurance, and property management costs, you could potentially earn a monthly income of $2,000 or more.
In certain areas, short-term rentals may well reap more benefits than long-term rentals. There are companies like Evolve.co who will manage the property, market it, and maintain it for you. Yes, there’s a cost to that, but it’s likely well worth it for the peace of mind it will bring you. Similarly, should you do a long-term rental, Global Property Systems (GPS) will help you find a tenant that suits your requirements. GPS also has property management services here in the Hudson Valley of New York.
Understand the risks
Before becoming an accidental landlord, it’s essential to understand the associated risks, such as maintenance costs, insurance requirements and costs, and tax implications. Forbes has provided invaluable guidance on what homeowners need to know before becoming accidental landlords in their article titled: “Should I Sell My House or Rent It Out?”
Develop a clear strategy:
Before making any decisions, it’s crucial to develop a clear strategy based on your financial goals, current situation, and risk tolerance. This could involve consulting with your CPA, a financial advisor, and Global Property Systems, who can provide expert guidance and advice.
Conduct a thorough analysis:
To evaluate whether renting out a home or selling it would be the better option, a thorough analysis should be conducted. This could include a cash flow analysis to determine the expected rental income and expenses, a comparison of selling prices and potential investment returns, and an assessment of the risks and benefits of each option.
Consider long-term implications:
When making any financial decision, it’s essential to consider the long-term implications. For example, suppose you decide to take this step and rent out your home. In that case, consider the long-term rental market trends, the potential for rental increases, and the potential for property value appreciation that comes into play. If you opt for short-term rentals, ensure you understand the impact of vacancies, seasonal fluctuations, and overall projections for the short-term rental market.
Any investment or financial decision involves a certain degree of risk. Therefore, it’s important to manage risk by diversifying your investments, having adequate insurance coverage, and having contingency plans in place.
To make informed decisions, staying abreast of market trends, regulations, and tax laws that could impact your financial situation is essential. Keeping up-to-date on these factors can help you make more informed decisions about renting or selling your home.
It’s important to note that becoming an accidental landlord comes with its own responsibilities and risks, such as maintenance costs. It’s recommended to seek advice from a qualified tax advisor or real estate professional before making any decisions.
In conclusion, while high-interest rates may seem like a barrier to exploring new opportunities, there are innovative solutions like this that homeowners should consider renting out their existing homes; homeowners can benefit from rental demand, maintain ownership of their properties, and earn increased income.
If you’re interested in learning more about becoming an accidental landlord or renting out your home, check out the following articles:
- “Becoming an Accidental Landlord: A How-To Guide” by The Balance: https://www.thebalance.com/how-to-become-an-accidental-landlord-1798682
- “The Pros and Cons of Being a Landlord” by The New York Times: https://www.nytimes.com/2019/06/14/realestate/the-pros-and-cons-of-being-a-landlord.html
To learn more about how Global Property Systems can help, whether you’re thinking of buying a new home, selling your current home, or just wanting to add value without making an expensive mistake, reach out to us at Global Property Systems to learn more about how we can assist you.
Please note that this blog is for informational purposes only and is not intended to provide investment, insurance, or tax advice.