60-two per cent of Americans still see the economy as a path leading to nowhere, a figure unchanged from last year at this time, according to results from the Fannie Mae Q4 2010 National Housing Survey. But there is a glimmer of hope in the housing market mess: renters.
In what might be the new lucky break for homeowners looking to shake the house they can’t sell for a hit in this market, attitudes towards renting are changing. Once viewed as a temporary state of housing until enough money could be stockpiled for home ownership, more and more renters report having no intention to become homeowners one day.
While the majority of Americans still believe that owning a home makes more financial sense than renting, 28 per cent believe that renting makes more sense, up eight points from January 2010, according to the survey. Never mind that current renters expect that rental prices will increase by an average of 2.8 per cent over the next year, they reported being more likely to say they will always rent, a five point upward shift compared to January 2010.
For homeowners looking to enter the rental property market, this new batch of consumers could be the next wave of investment potential. Renters who are willing and able to find a rental home for the duration means steady income and lowered turnover and marketing costs for a homeowner turned landlord. How do you determine if you should rent or sell your home?
This is one decision with many factors to consider, like your current income stream, mortgage terms, monthly payments and location. But, when all those magical factors align, it can be a good way to ride out the housing market, and add a little boost to your income stream. Here are four factors to consider when weighing the costs associated with transforming your home into a rental property.
1. Property management: (Generally 10% of the rental price)
2. Tax Deductions: Mortgage interest, property taxes and expenses related to the operation and rental of your home can all be deducted.
3. Depreciation: Calculated by the purchase price of house (but not the land) divided by 27.5 each year, and the cost of repairs. If expenses exceed the rental income, you can deduct up to $25,000 of the loss against other kinds of income.
4. Lowered Insurance: By not occupying your home, you can downgrade the homeowners insurance to rental-property insurance. Generally, this is 20% less than the cost of a homeowners’ policy.
There are also the intangible costs: the general stress and hassle that comes with dealing with tenants, and more importantly, how bad it can get when they are bad! This handy calculator on Forbes.com can help in the initial consideration process.
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