Rent Your Property Or Sell It?
There are many reasons you might end up with two properties. Maybe you are buying a new home for your family or merging two families, or maybe you inherit a property. It doesn't matter what reason you have. However, it is important to decide what to do with the property in which you will no longer live. For helpful advice on how to decide what to do with your second house, read on.
Definition Of A Second Home
We'll define a second home for the purposes of this article as anyone that you don't intend on living in, not necessarily the most recent.
Why Rent Your Second Home When You Can Live In It?
If you are looking to move to a temporary place, renting your house might be the best option. The breakeven calculation is one that can help you decide whether renting or buying is better based on the length of your stay.
Home Values Increasing: Leasing your home could be a good option to take advantage of this appreciation before you decide to sell.
It's Impossible To Sell: If your mortgage is underwater, selling may not make financial sense. You can gain equity by renting out your second home.
If the rent you earn is more than the mortgage cost (and ideally includes property management fees), then leasing your home might be a smart financial decision.
Property Management Is Possible: Renting can be a great option if you have the finances and the time to manage your property yourself. Remember to include maintenance costs.
Capital gains taxes could apply to you based on how long the property has been yours and how much time you have lived there. If you sell now, capital gains taxes may be due. Renting allows you to plan a sale that minimizes tax consequences.
Why Would You Sell Your Second Home?
Permanent moves are possible: It may be a good idea to sell your home if you're moving to a new area. However, it can be difficult to manage a rental property if you aren't planning to return to the area.
You Have Equity In Your Home: Many homeowners must sell their homes to make the down payment for a new house.
This Is A Hot Market: Homes in your area are selling quickly for high prices and at a rapid pace, so it might be a good time to sell a second house. You can find the best time to list in your area.
You Are Not Interested In Becoming A Landlord: Overseeing a rental home can be stressful and time-consuming. If the rent you would be able to charge doesn't cover your mortgage and property management costs, it may be worth selling instead of being a DIY property manager.
What Taxes Are Due On A Second House?
Property Taxes: You'll still have to pay any property taxes if you own a home.
Tax Implications For Rental Homes: Talk to your accountant before deciding about renting or selling a second house.
Capital Gains Tax: It all depends on the length of your stay in the house and other relevant factors. You may be subject to capital gain taxes.