Should My Home Be a Rental Property?
6 Things to Think About Before Deciding.
At our Phoenix property management company, we regularly encounter homeowners who want to learn about renting out second or third properties. To make the right decision for your family, you have to look beyond the potential profits. You must consider your long-term plans and the feasibility of the rental property. If this is a home you have lived in for several years, you may also be too emotionally attached to the home to rent it.
When renting or buying a Phoenix rental property, Service Star Realty knows what it takes to build a successful business. Since we first opened in 2011, we have become the property management team of choice for more than 800 different properties in Arizona. If you are trying to decide if you want to rent or sell a primary residence, our experienced team members can guide you through the process.
Questions to Ask Yourself:
Before you start renting out your home, it is important to take a moment and think through your plan. You do not want to make a decision you will eventually regret. Before we encourage any homeowner to sell or rent a property, we get them to answer the following six questions.
1. Would I still buy the home as a rental property if I did not own it already?
This is an important question to ask yourself. If the answer is no, then you do not have to look at any more questions on this list. Often, the kind of home you buy to live in will be different than the kind of home you might want to rent out.
You can still start a rental empire, but you will need to get a different property. Instead of renting out your original residence, you can sell the property and buy another one. Depending on how much your initial home is worth, you may even be able to get a duplex or a multi-family residence.
2. What will my monthly rental net profit be?
Your net profit is the amount you have left after you have paid for property taxes, repairs, insurance, mortgage payments, and similar expenses. There will also be fees from your Phoenix property management team and your homeowner association. Additionally, you should be careful about estimating your gross earnings. Your unit may remain vacant for a while between tenants, and it will not earn any revenue during each vacancy.
You should also be reasonable about your maintenance costs. An older home will generally require more frequent repairs. If you do not take this into consideration, your estimated net profit will be inaccurate.
3. What are my long-term plans?
Before you list a Phoenix rental property, you should consider your long-term plans. With real estate in general, the best investment is an investment that is held in your portfolio year after year – not something to only hold onto for only one or two years. your own.
However, if you plan on living somewhere else for a short period of time, renting out your home may also be a good option. During the interim, the property can pay for itself while you enjoy your new life.
4. Am I emotionally attached to the house?
When you rent a home to someone else, they are legally entitled to enjoy the property. This can be a problem if you cannot emotionally detach yourself from your Phoenix rental property. A rental property is a business, so it should never be treated with nostalgia or sentimentality.
5. Will I live nearby?
This is another important consideration. Managing a Phoenix rental property is generally easier if you live in the same area. When you move to an entirely different state, it can be difficult to manage a rental property on your own.
If you plan on living out of state, you will most likely need a Phoenix property management company to take care of your rental unit. When you live far away, it is especially important to find a management team you trust. We know how much our property owners depend on us, so we make sure to handle all of the big and small details involved in running a successful rental.
6. How will a rental property affect my taxes?
Depending on your tax situation, a Phoenix rental property could make your life incredibly difficult. It could also potentially reduce your tax bill. Because the tax implications can vary significantly, you should talk to your accountant before you decide to rent your old home.
When your home is a primary residence, you have some tax exemptions on profits from the sale of your home. However, when the home becomes a rental property, you now may be subject to Capital Gains Tax when you eventually sell the property. You can always reinvest those proceeds into the purchase of another home through a process called a 1031 Exchange if you wish to stay in the Phoenix rental property industry.
We know that setting up a Phoenix rental property can be a stressful decision. If you are trying to decide whether you want to rent or not, our Phoenix property management team can help. To learn more about the services at Service Star Realty, call us today.
Other blogs you may find interesting:
Should I Rent or Sell My Home? (Part 1)
Should I Rent or Sell My Home? (Part 2)
Service Star Realty
2929 East Camelback Road #119, Phoenix, AZ 85016
(480) 426-9696
