It’s been said that the American dream is to own a home. But what about owning more than one home? Not everyone has any interest in owning more than one home, especially when it comes to owning a rental property. I never did. I was perfectly happy owning just the home I lived in, until we found our dream home, bought it and now own two homes.
The home my husband and I built when we first got married is now a rental property we own. It’s our first foray into the world of investment property, and it’s been an interesting one. It’s been interesting in that we haven’t had any troubles with our rental in the past year we’ve had it…thank goodness, but it’s certainly a learning curve for us at the moment. We’re learning what it takes to be landlords and to maintain two homes and to embrace all that our rental property has to offer.
Anyone considering a rental property might want to consider the advantages and disadvantages of acquiring a second home. It’s not the same for everyone, but it worked well for us. With that said, I’ll share some of the best advantages and disadvantages of owning a rental home as far as I’m concerned.
There is nothing quite like owning two homes and having someone else pay for one of them. It’s a nice investment to know that you can sell that home at anytime and keep the profit, yet you were not the one paying for it in the first place. That was all someone else.
The big thing is to remember that having a mortgage on two homes means that your rental income might not be money in your pocket. For example, if you own a rental property with a $700 mortgage and charge your tenants $1000 per month, you might assume that you are now profiting $300 per month. Kind of, but not really. You need to save all that cash so that when something goes wrong with that house, you can fix it for your tenants. You also need to stockpile that in case your tenants vacate the property and it takes you longer than you thought to find a new tenant. That money is typically not just money in your pocket if you have a mortgage.
You will receive a number of tax breaks owning a rental property, and that can help your personal finance situation a bit come tax time. This is one of the more beneficial advantages to owning a rental property.
The second something breaks, you have to fix it. Believe it when you hear that some tenants will call you at 3 am if their hot water isn’t working or if their air conditioner stops working, and they’ll call you. They’ll call about everything, and you will need to handle it right away. That can be a bit of an issue at times.
When you do have a rental income property, you get to choose your renters. You get to be as picky as you want and make the decisions based on a number of factors. That makes it easier for many rental income property owners to let strangers live in their home. It is, after all, your home and it does take a lot of bravery to let strangers occupy it for as long as they need to.
Of course you need someone to live in your home or it does not become a rental. But even though you might carefully vet your tenants, there is always the worry that they will not care for your home. After all, it’s not theirs and the thought of losing a small deposit might not really bother them if they put a hole in the wall or damage your carpet or your windows. In their minds, this is your problem; not theirs.
If you own a home outright and want to rent it, that’s all profit aside from what you set aside for maintenance and repairs. If you don’t own the home outright but you do charge your tenants more than you owe monthly, you can apply much of their additional rental payments to your principle mortgage and end up paying a lot less interest and paying off the house a lot sooner.
There are always small chances when you choose renters that they might not pay their rent, and in many places it can be quite a struggle to evict a tenant of a property. It’s expensive and it could cost you months of rental income and legal fees to kick out a tenant who is not paying their rent, and that means serious financial issues for anyone with a rental property.
There are so many advantages to owning two homes, such as the fact that real estate historically increases in value more often than not. This means that you will have two homes worth more money in the future than they were when you bought them, and that can mean some seriously great things.
Just like owning more than one home can be a great advantage, it can also be less than amazing. For example, you have two homes to keep up, repair and maintain. That’s two septic systems to have cleaned, two roofs to replace, two sets of appliances that could need replacement at any time. It’s two of everything, and that means double the expense. This is often a big deal for some Americans, and it’s one of the reasons that some Americans want nothing to do with owning rental income properties when they make their way into the world of real estate investment, home buying and income potential as a way of starting their own business.