Upon acquiring your property, the next decision will be either you will use it for personal purposes or rent it out. Here we list the pros and cons of both using the home you bought as well as leasing it out to others as advised by the InCharge Debt Solutions and TransUnion.
What are the advantages of owning a home?
• Greater privacy.
• Homes typically increase in value, build equity and provide a nest egg for the future.
• Your costs are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage.
• The interest and property tax portion of your mortgage payment is a tax deduction.
• There’s pride in homeownership, which also closely ties you to your community.
What are the disadvantages of owning a home?
• Homeownership is a long-term financial commitment.
• You’re responsible for all maintenance on your home. This can include inexpensive repairs like fixing a broken toilet to complex and costly repairs like replacing a furnace.
• Owning a home ties you to your community, making it more difficult to suddenly pick up and leave a location.
• Although mortgage payments are usually fixed, they’re generally higher than rent payments.
• Buying a home requires a down payment, closing costs and moving expenses.
• The value of your house may not increase – especially during the first few years.
What are the advantages of leasing your property?
• Renting can provide you with extra income, as long as the rent is higher than the mortgage payments and other expenses combined.
• Holding a property while a down market recovers can prevent the negative impact of a short sale or foreclosure, and if property values climb, the real estate might even produce a profit later on.
• Real estate is tangible, usable property with value beyond a mere dollar figure: you can live in it. (You can’t do that with a stock certificate or other intangible asset.)
Traditionally, real estate has been a builder of wealth when acquired and managed wisely, notwithstanding the recent subprime mortgage crisis.
What are the disadvantages leasing your property?
• As many learned from the real estate bust, houses don’t always go up in value, and can even go “under water” — meaning you owe more than the property is worth.
• Market rents fluctuate, and your property may produce less rental income than you anticipated or even sit vacant for several months, causing financial strain.
• Dealing with tenants and the maintenance of a property is something to which not everyone is able to dedicate time and energy.
With these in mind – you should be able to make a sound decision whether to make use of your property or rent it out for others for passive income. Both have their own pros and cons so make sure to weigh each and come up with a decision that you won’t regret.
