A Pew Research Center analysis of Census Bureau housing data revealed that more U.S. households are renting than at any point over at least the last half-century. If you’re thinking about renting out your home, whether it’s in Dallas or any other area of the country, odds are you’ll have quite a few applicants to choose from.
These pros and cons of renting your home will help you make the best decision possible.
The extra income. Renting your home can be a great way to earn extra income, provided the rent you can charge in the area will be higher than your mortgage payments and other expenses combined. You can find out how much profit you’re likely to make each year by taking the amount you’ll make on rent and then subtracting for repairs, HOA fees, taxes, your mortgage payment and expected vacancies. You’ll want to come out at least $1,200 ahead for the year for it to be worth it.
Property value growth. As you own the property, you’ll get to benefit from an increase in the property’s value over time. Of course, that will depend on its specific location, with values rising significantly in some areas in just a few years, remaining flat in others. Value growth typically holds pace with inflation at a minimum. If you’re in an above average area, you may be able to beat inflation, but if you’re on the other end of the spectrum, an area that’s stagnant may not be able to keep up with it. Traditionally, real estate has been a builder of wealth when managed wisely.
The risk of bad tenants. Just because you have tenants, that’s not a guarantee the rent will always be paid. Even with the best tenants and in the best of times, things can happen. You might get a fantastic tenant that pays the rent on time month after month for years, but you’ll probably run into tenants that always seem to have problems, paying late or not at all. You may end up losing out on several months of rent, not to mention the time and effort it takes to deal with an eviction.
Fluctuating market rents. As market rents tend to fluctuate, your home may produce less rental income than what you planned for. Or, it could end up sitting vacant for months which can be a big financial strain. How long can you cover two mortgages?
Dealing with emergency repairs and maintenance. You’ll have to deal with emergency repair calls which often come at the most inopportune times, like the middle of the night or while you’re on vacation in Hawaii. Maintaining the property is also something that you’ll have to dedicate your time and energy to.