Should you rent your unsold or second home?
In a down economy and depressed housing market, you may find yourself stuck with an extra home for reasons you never dreamed of - including having to relocate to take a job, losing the ability to pay mortgages, taxes and upkeep for two properties or simply not being able to use the home as much as you would like to. If you can't face a year of double expenses, you might want to consider becoming a landlord.
While renting your unused home can help you recoup all or part of your mortgage and other costs, like any other investment, it carries risk. You may not be able to find tenants willing to pay the entire amount you need to cover your expenses, or the tenants you do find may fall behind on rent or cause property damage.
You may also face a new set of tax consequences, which you should discuss with your tax professional, including losing the IRS capital gains exclusion on the sale of a principal residence. And, your rental income adds to your adjusted gross income, which could make a difference in your tax bracket. You'll also need different insurance coverage for the rented property than you do when you live there yourself.
The book, "Becoming A Landlord: Rewards, Risks and Responsibilities," provides more information on the pros and cons of becoming a landlord. You can download the book free from Fannie Mae by clicking here.
When you own a second home by circumstances or choice, you need to consider your options. Our office is happy to work with you - as well as your tax, insurance and real estate professionals - to determine how renting your extra home fits into your overall financial picture. Call us to arrange a meeting.
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