Renting My House Out

This article discusses renting my house out. Problem: You're committed to moving, but you can't sell your home at the price you want because high mortgage rates are scaring off buyers. Solution: Stop trying to sell, and rent your house instead.
Key advantage: Renting out your house turns it into a business property. This entitles you to deduct operating expense, maintenance, and repairs, and to depreciate the property. Result: A $200,000 house with an estimated life (for tax purposes) of 40 years yields an annual deduction of $5,000 for depreciation, on top of the amount you put in to maintain it. Extra: If you rent the house furnished, the furniture, too, is depreciable.
Note: When establishing a depreciation schedule for a rented home, the IRS requires that owners compute the value of a house by taking the lesser of its fair market value or its purchase price plus the value of permanent improvements made. The depreciation schedule itself is supposed to stretch over the remaining useful life of the house. That figure depends on both the age and the condition of the dwelling. See renting for more information.
Drawing up a lease:
To retain the option of moving back into the house on short notice, lease on a month-to month basis.
Stipulate which redecorating, maintenance, and repair costs will be borne by tenants. Usual terms: Owner pays for major repairs, renter for minor work. Set limits on what redecorating the tenant may do.
Spell out the conditions under which you may evict your tenants.
Make the renter pay for utilities.
Include an option to buy only if it is essential to rent the property.
Don't rely on a standard lease form. Consult a lawyer to draw up the papers.
Consider hiring a property manager to handle your home if you will be located far away. (Property-manager fees are tax-deductible.)
Consult your accountant before setting the rent. Reason: A low rent may permit you to take a tax loss, which could be more advantageous than added rental income. Caution:
Drastically undercharging on rent to create a tax loss will be disallowed by IRS.

Finding Reliable Tenants: Referrals are the best bet. For the owner and tenant to have a mutual friend will give the renter a greater sense of responsibility.
Check with local large corporation for families in transit who need temporary housing.
Advertise in the newspaper. List your phone number, but not the street address (to protect your privacy).

To Renting My House Out - Top

Having A Garage Sale: Be the first to open for business. If competing sales open at 8:00 a.m., begin at 7:00. Sixty percent of the customers arrive before 10 a.m. By noon, it's 70% to 90%.
Suggestions:
Price-label all merchandise. Uncertainty about prices stifles impulse buying.
Display goods in plenty of open boxes and on long tables. (Improvise with long boards mounted on boxes.) Avoid high stacks. They make browsing difficult and look disorganized.
Anything that's good sells better if it has been cleaned. Wash all china and crystal. Display them on a white tablecloth. Polish old furniture. This attention shows you value the items.
Play any radio or television that works well. Have on hand:
Thirty-five dollars in nickels, dimes, and quarters to make change.
A tape measure.
Wrapping material to make it convenient for customers to carry off their purchases.

Financing Your Own House Sale: As mortgage rates remain high, an increasing number of homeowners are enticing buyers with offers to finance the sale themselves. By offering financing, sellers may make their house so marketable that outside financing will be unnecessary. Bonus: The commission saving is substantial.
Caution: Although financing the sale of a house is simple in principle, sellers should have the advice of a lawyer who specializes in real estate.
Four basic methods:
• First mortgage: If you are trying to sell a $100,000 house that has no mortgage (a rarity), and the purchaser can afford only $40,000 cash down, then the purchaser simply gives you a first mortgage for $60,000 which is paid out over an agreed upon interest rate. In case of default: You keep the cash and foreclose on the house.
• Second mortgage. If you are trying to sell the same $100,000 house with an existing $50,000 first mortgage, a second mortgage reduces the cash that a buyer would need. How it works: The purchaser assumes the first mortgage and gives you a $20,000 down payment. The purchaser then gives you a second mortgage for $30,000. Interest rate and maturity date are negotiable. Caution: Many existing first mortgages held by institutional lenders contain a "due on sale" clause, which prohibits the sale of the house without the consent of the leader. Typically, such consent is given only if the interest rate is substantially increased.
• Wrap-around. Similar to second mortgages. Using the same numbers as in the second-mortgage example, you get a $20,000 down payment, but instead of taking back a $30,000 second mortgage, you take back an $80,000 wrap-around mortgage (the amount of the first mortgage plus the remaining $30,000 of the sales price). Advantage:
Defaults are quick to catch because the buyer makes all payments directly to you, and you pay the first-mortgage portion to that lender. Another advantage: The interest rate on the wrap-around is calculated on the entire $80,000, even though the $50,000 first mortgage portion may be a lower interest rate. Result: You receive the interest average, giving you a higher yield on your $30,000 portion.
• Leasing with purchase option. Lease payments may be applied to the purchase price, an amount agreed on when the deal is made. Best approach: Make the term as short as possible. Why: Should another prospective buyer come along with ready cash, you won't be hindered by long-term contract. Advantage of purchase options: Since you are still the owner, you can depreciate the house as a rental unit.