I’m looking to buy my first home (house hack). I’ve been looking for over a year and a question popped up in my head.
If I buy this house (single family), live in it for a year or two so I can save more money renting out the spare rooms then buy another property once the first is stabilized. How will the numbers change once it's a full fledge SFR ready for market?
I’m imagining a scenario something like this-
I purchased a house I thought was a good deal and a great monthly mortgage leaving plenty of savings and cash flow. Repaired everything that needed to be done to make a solid rental. Only to find out that once I convert it to a rental property the property taxes skyrocket and eat up all the cash flow.
Do property taxes go up substantially when converting a home to a rental property? Is there any way I can foresee what will change so I can figure it in to my analysis?
So you are probably right that the taxes will go up when you turn it into a rental as well as your insurance on the property. Living in it for a couple years you may be able to refinance the property and reduce your monthly payment which could help.
Check your local government agency website, you should be able to locate a tax estimator or be able to look up tax info on single family rentals. You can compare to what you currently pay to what you find and that can give you an idea of the delta increase you'd get when you convert it to a rental. A consult with a CPA may provide helpful info as well and would likely be a smart move.
@Michael Bacile This can vary by area, but where I'm at (California) the property tax rate doesn't go up at all if the property were to change from owner-occupied to rental. (You'd lose your homestead exemption but that'd result in only a small change and it wouldn't affect the rate you're paying one bit.) It could be different in other states.
The best thing to do in order to get a definitive answer is to call your local county property assessor's office and ask them.
Thanks for the advice, I’ll make a few calls and add to my notes haha. Appreciate your time