Is it time to move, but you're interested in home leasing and keeping the old homestead as an investment? If you can afford it, since market values usually go in one direction - up, home leasing is usually a good long-term investment. Obviously, you'd prefer to avoid having to carry the mortgage and taxes. Therefore, the prudent choice would be to consider leasing it to a dependable tenant.
Due to the financial inability to purchase or because they live a mobile lifestyle, or they simply prefer to avoid being tied down to home ownership and all that entails, there are always people who choose to rent. Therefore, home leasing is a viable option for an existing homeowner, provided of course, that prevailing personal and economic circumstances support such a commitment.
Obviously, you have to leave behind at least a portion of your equity. If you can withdraw enough to invest in your next home, or if buying another home in the foreseeable future is not in your cards, then go for it.
If you want your investment to be revenue neutral, so that you're not generating taxable income nor creating a monthly deficit, your equity must be sufficient to ensure that the rental income covers the payments for the mortgage, property taxes and insurance, as well as regular maintenance and repairs.
If, for a limited time, you're moving to another city or out of the country, you may want to limit the lease to the duration of your absence. That way, you can return home afterward. Make sure your tenant understands your intention and agrees to vacate on the predetermined termination date of the lease. It's advisable to include a termination clause in the lease document that ends the lease term prior to your return. In other words, have a buffer during which the house will be empty. If the tenants fail to vacate on time, or if the house needs repair before you move in, you'll appreciate the extra time. You should also make arrangements for someone to manage the property - which includes rent collection - while you're away.
If you're not moving away, but still want to keep it as an investment ...
Real estate markets traditionally
support long term (and sometimes short term) investment because over time, market
values historically increase. Properly structured, rental
income can literally pay off your mortgage. However, if you're presently in a
declining market, it may not make any sense to keep it. If a
corporate stock or bond growth outlook was dim, and its value was sinking, would you keep it? I think not.
Remember that being a real estate investor usually means being a landlord too. And being a landlord isn't always pretty. Tenants can be troubling. They can be poor rent payers or even neglectfully or maliciously destroy your beloved home.
If you're asking yourself the question, 'What's involved in renting my house?', you may want to visit this home leasing page to learn more about the pros and cons of keeping and renting your home as an investment. And learn more about being a landlord by visiting the Canada Mortgage and Housing website CMHC.
If you're in Ontario, learn more about landlord and tenant rights and responsibilities under the Ontario Residential Tenancies Act. There will be similar legislation wherever you are in the "civilized" world. In the meantime, stay awhile on my website to learn more about the popular world of real estate.
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