If you own a home and are PCSing this year you might be trying to decide if you should rent or buy. Sometimes the market pushes you to make the decision, but you should also consider the outside costs and possible negative outcomes tied to renting.
Real estate is an investment and with any investment, there is a risk. That risk can pay off in a positive way, but it can also become a thorn in your side. Here are some things you should consider if you have bought a home and are now trying to decide if you should rent or sell.
Tenant Rights and Renting Restrictions
Each state has its own rules and guidelines for renters and landlords. It can be heavily favored one way or another. Making sure you understand the laws and know how to protect yourself and your asset is very important. And if you are in a neighborhood with an HOA you might need to see what restrictions they have set in place for rental properties.
The Unexpected Expenses
When you are the landlord you are responsible for repairs and the replacement of various things in your home. In some areas of the country, it is common practice that a certain amount of the cost needs to be covered by the renter, but that rarely covers the full cost. On top of these costs, you also need to be prepared to cover the cost of minor repairs and/or replacements when your renter leaves and you prepare for a new occupant.
Months Without Renters
The optimal plan is to always have renters in your house. Then they cover the cost of your mortgage and you are able to continue to pay off your loan. But you should prepare to have months when no one is in your home. It could just be the time between one renter and the next or it could be that your renters leave unexpectedly and getting the rent you are due requires a court battle and even more money.
Speaking of renters leaving unexpectedly, one of the hardest parts of renting is finding good renters. It is hard to know how your new tenant will treat your home, or what unexpected life circumstances could happen to prevent them from paying you on time. If you rent to a military family, it often makes it easier to get the money they owe you, but they also can have a military clause in the contract. As we all know, with military life moves can happen unexpectedly and this may leave you scrambling to find new renters.
If you are living far from your property it might be useful to have a property management company. They can help you with the process of finding new renters and helping to keep a watchful eye on your property since you cannot. These companies require a fee and just like renters – some are good and some are bad.
One hidden cost you may not expect from renting was how it can affect your taxes. Rental income may be able to be written off, but it may also change your tax bracket. Make sure you consult an accountant or CPA when considering your rental options.
Are you considering renting your home? What are the positive and negative aspect that may sway you one way or the other?
Written by: Amanda Huffman