If you are planning to move in the near future, there is always a primary decision to make whether you will be opting to rent out a place or buy a new property that you will live in indefinitely. Best case scenario, you already own an investment property but you are still unsure if it would be a good idea to live in it or rather rent it out.
Before everything else, you also need to take a pause and recognize the difference of what it means to have an investment property and changing into your home residence from just renting out the place. Read this post below and be sure to check out some interest only home loans from Newcastle Building Society to have a better understanding on home loan options for your new investment.
Converting Your Home into a Rental
One of the benefits of turning your property into a rental is to have an added income. Homeowners usually convert their homes into investment properties if they find that their home value is a bit low that’ll make it difficult to sell quickly or if the house market is struggling.
Once you’ve converted your residence into an investment property, you should be aware of the taxes, mortgage and insurance involved before you begin the transition. Property taxes and other potential deductions such as mortgage, utilities, home maintenance and repairs, utilities, Homeowners Association fees, and even depreciation should be considered in your expenses. Home insurance will also be changed into rental property insurance plus personal liability insurance to protect you from getting sued by your tenant.
Pro tip: don’t convert your house to a rental until you know how much the rental market will bear. You don’t want to convert your real estate unless the rent you can charge will cover ALL your expenses. The best way to do this is to look at your local area and see how much comparable properties are going for. For example if you live in Houston, Texas, you could use a tool like Rent CAFE to gauge the market.
Making My Investment Property as My Primary Home
If you are now planning to move into your investment property and marking it as your actual home, you will need to declare that change as the principal place of residence. The Tax implications on that certain investment property will be accounted for and will no longer be “tax deductible”. The property will benefit from the tax exemptions considering you have labelled as an actual residency than a rental property. It may be an ideal way to also reduce your monthly mortgage expenses.
But if you find yourself living in a huge space and wanting to utilize and rent out some of the extra units or rooms. Owning whilst living in a rental property is allowed in accordance to the mortgage lending guidelines. This allows you to gain access to a lower mortgage rate and have additional profit from rents collected from the other units.
With all these to consider, also take the time to talk the numbers and formal requirements with experts before you make the switch. It takes proper and careful planning to make this change and move forward in owning a home or renting out an investment property.