Deciding to buy a home requires a long-term plan that includes both a financial and a personal strategy for the future. Most financial planners recommend that you own a home for at least five to seven years in order to build equity and recoup your investment in the property.
But what if you’re not sure you will be in the home that long? A job transfer or a change in lifestyle, such as getting married or having a family, can shift your priorities or needs before five or seven years have passed, particularly if you are relatively young and in the midst of building your career.
One way to feel more comfortable buying a home despite your uncertainty is to consider the option of renting out the property instead of selling it.
Renting your home gives you the opportunity to build more equity over a longer period of ownership and to offset the cost of owning through rental income. Some homeowners who assume they will be short-term landlords end up appreciating the investment in real estate and continue into the future, while others wait for a strong market and the right moment to sell.
What to Look for in a Potential Rental Property
If you are particularly uncertain about the future, you should look for a home with potential rental appeal when you are looking for a place to buy. Think about who rents condos, townhouses or single family homes in your area and what features they would appreciate. For example, you can buy near a college, university, law school or medical school in order to have a continuously renewed population of renters as each class graduates and new students arrive.
If you prefer not to rent to college students or grad-school students, you can target your home search to areas where young people live before they are ready to become homeowners. Depending on your area, this could be near public transportation, nightlife or both.
Buyers who prefer a single-family home should try to find a home in a school district that appeals to families, yet also has a good location near transportation, recreational amenities and shops.
Renters often want to share their property to keep costs low, so if you can afford a two- or three-bedroom place with at least two bathrooms, you may find it easier to attract roommates who will split the rent. Families, too, usually want at least two or three bedrooms.
While rental markets adjust along with the rest of the real estate market, you should look into current rents in an area where you want to live to see how they compare to purchase prices. If rents are extremely low, you may find it hard to charge enough rent to cover your mortgage; but if rents are high, you could actually profit from becoming a landlord in the future.
Disadvantages of Owning Rental Property
While your goal initially is to live in your home, you should consider the pros and cons of becoming a landlord in the future.
For example, some of the potential hazards include a gap between tenants, which could be lengthy if there are more rentals than demand in the area. Even if you have tenants, you could have problems with their damaging your property or not paying the rent on time.
As the landlord, you are responsible for repairs and maintenance, even if you live out of the area, so you may want to consider hiring a property management company to help you screen tenants and keep your home in good condition, especially if you plan to sell it someday.
While planning to be a landlord may not be the perfect solution, it could be an option that will make your rent vs. buy decision a little easier.
Content courtesy of http://www.realtor.com
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