If you are nearing retirement and are thinking of selling your home because you no longer want the problems of taking care of a large house, or maybe you plan to travel, you might want to reconsider. You can actually turn your home into a monthly cash flow that can help you finance your retirement.
This is a good option for retirees that no longer want to live in their home. There are a number of benefits to renting instead of selling your house, especially if you already have your house paid for. When your home is already paid for most of what you get in rental income will be profit. If you want to travel, you can hire a management firm to oversee the rental or ask one of your adult children to take care of it.
Does it Makes Sense for You To Rent Out Your Home
Assuming that your home is paid for, most of what you get in rental income will be profit, but you do have to factor in some costs, such as upkeep on your home, as well as vacancy time. Before you decide if renting your home will be the better alternative to selling, you will first have to look at the expenses.
How much will you likely be able to charge for rent? Once you have come up with an amount, you will need to add together the costs you are likely to incur, such as home insurance, repairs to the house, taxes, and possibly property management fees. The cost should be about 10%, but can be up to 20%. With these calculations, if you rent your home for $1,500 a month you should make about $1,200 a month profit. Adding this monthly income to your retirement cash flow will obviously be very helpful.
Another advantage to renting your home instead of selling is that you will still be building equity in the property, and can sell it at a later date if you choose. Your house will likely continue to increase in value over the long term so when you do sell it, you may possibly make a bigger profit than you would if you put it on the market now.
Decrease Tax Liability
When you rent out your home there are some tax deductions that can be helpful in lowering your tax obligation. All of the repairs that you make on the home can be deducted from your income, or depreciated, as well as some travel expenses, if the travel involves taking care of your rental property. You might even be able to get a deduction for a home office if you use it to manage your rental property. Travel expenses and home office deductions can be tricky with the IRS, so be sure that you get the advice of a tax professional before using these deductions.
- UNDERSTANDING YOUR 401(K): TRADITIONAL VS. ROTH - November 11, 2019
- HOW TO ENSURE YOUR INSURANCE MONEY GOES TO THE INTENDED BENEFICIARY - November 11, 2019
- THREE COMMON RETIREMENT INVESTMENT ERRORS - November 11, 2019