If you are looking to move, consider converting your home into an investment property.
Why turn your house an investment property?
A low housing market decreases the value of your home while on sale. Save money and rent out your home until the market recovers.
As compared to an investment property mortgage, primary residence mortgages are much lower. If your investment property was first bought as a primary residential property, take advantage of the lower property mortgage and rent the space for a profit. This income can be used to pay off mortgages for both your investment and primary properties.
Drawbacks to Consider
Before making any big arrangements, consider any shortcomings.
When a mortgage is signed as a primary residence, there is often a legal document stating you must occupy the residence for a certain amount of time, usually around 1-2 years. If you try to turn your home into an investment property before that time, you may face mortgage fraud and legal consequences.
Additionally, many mortgages include a clause prohibiting using rental income to pay off a mortgage. Before converting your home into an investment property, go over your mortgage with experts.
When your home becomes an investment property, deductions will be added to your investment property taxes. In addition to deductibles such as utilities, homeowner association fees, home repairs, insurance, and property taxes, depreciation will also be deducted.
Furthermore, as homestead exemptions only apply to a primary residence, taxes will increase for your investment property. You will also have to switch insurance to rental property insurance and request personal liability insurance. This will protect you against being sued by a tenant.
Turning your home into an investment property isn’t an easy process, however it can be advantageous for many people. Do plenty of research. Consult experts and your insurance company before making any big decisions.