What happens if you decide to move from your current home into a new one and keep the first one as a rental? More and more people are starting to do this, which makes sense, as it has a lot of benefits! Today I’m here to give you all of the necessary information on this topic.
First, you’d get to keep your current interest rate, which I’m guessing your rate is far below what typical rates are today. Also, you’d benefit from the cash flow. However, you are now a landlord, which can feel like a full-time job. Are you prepared to deal with questions and problems as they arise? Repairs are normal, as every house needs them eventually.
“There are tremendous advantages to investing in a rental.”
One tip I have for managing is to handle things beforehand, meaning vet your renter before choosing them. Although there are exceptions, history tends to repeat itself, so don’t choose someone with bad credit for example.
If you do find someone good, this real estate investment can be great for building wealth, certainly better than anything on the stock market. You will benefit from appreciation. For example, look at your current home and think about the price you paid for it compared to what it would be worth today. The difference is astounding! Plus, the renter could be paying your mortgage for you, which is called amortization.
In addition, depending on your tax bracket, you are allowed to depreciate the property. According to the IRS rules, as long as your income is less than $150,000 a year, you can benefit from this—just check with your tax advisor first.
There’s also a 1031 tax exchange, which means that you can take a rental property and sell it in an exchange, which is like a normal sale. You have to use a qualified intermediary, then you can avoid paying tax on your capital gain.
One last benefit of owning a rental property is that eventually, your heirs can inherit your wealth-building machine. There are tremendous advantages to this kind of investment, and I teach that to all of my team members and loved ones.
If you want more information, please contact me personally. We can talk about it and schedule an appointment to discuss how this could benefit you. Call or email me anytime to set that up.
