I will have my personal property payed off in about 3 months. I plan on Purchasing a new home to live in and use my payed off home to rent out. how should go about the transition from home to rental? im a total newbie! where do I start? how would you pro landlords do it?
Well, are you going to self-manage or have a property management company do it for you? If you do it yourself, you'll be doing the listing, marketing, screening, and collections as well as all repairs, etc. If you have them do it, they will do all of the above in exchange for a percentage of the gross rent. I would use rentrange or rentometer to get an idea of what FMV would be for rent and then make my decision from there based on how much money I wanted to make off of it.
There's more work to doing it yourself, but more money in your pocket at the end of the month.
wow that was quick! I plan on self managing and it should fetch 850.00 a month.
if you have a chance definitely check out my blog since we self manage our previous personal properties . We also buy pure investments but our key strategy is self management. I have a step by step guide aimed at people who are turning their personals too rentals.
There really is very little you need to do in "transition". The biggest difference is you are going to claim the house as a rental on your taxes.
Thank you! I will definitely check it out
Don't forget to check with your tax advisor as to the tax implications of the conversion. Depending on the capital gains, you may want to stay within the timeframe for considering it a personal residence.
There is no "tax implications" to convert it. Capital gains only matter if you want to sell it later.
That's exactly the "implication" I meant, the sale of it later. Conversion will definitely have tax implications .
If you have a gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You are eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. If he has a large capital gain, he might want to consider this, or at least plan for it!
You will need to calculate your cost basis so you can start depreciating the rental property on your tax returns. This will effect taxes due if/when you sell. You will need to change your property insurance to a landlord policy. You may also be able to put utilities in landlord status, and be sure they get switched to the tenants. Where I live the utilities (except water which stays with the house) are put in the tenants name. But you can arrange it to revert back to you rather than shutting off if the tenants move out or there is a gap between tenants. How will you advertise? What lease form will you use? What tenant application/background check? What deposits will you hold? You should get a separate bank account to keep expenses and income separate from your personal account. (Yes you can transfer money to your personal bank account as you need it. But it is good to have one place to keep track of all expenses for the rental).
Thank you! should I open a business account and start a doing business as (DBA)? Whats a good way to advertise?
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