More home buyers are generating rental income from their home
According to the latest Realtor.com survey, nearly 50% of American homeowners would entertain renting out extra space in their house. Almost one-third of homeowners have already tried generating rental income from their property, and around one-quarter would prefer to have long-term renters rather than transient occupants. As many as 85% of survey respondents would invest tens of thousands of dollars to create additional space if it meant generating additional rental real estate space.
This trend appears to be driven by younger Americans such as millennials, although it’s certainly not exclusive to that generation. The study identifies that a majority of those interested in renting out their home to pad their savings while 37% do so for extra spending money. 35% identify that it lowers their monthly expenses. 29% also say that renting out their home helps offset their mortgage payment.
George Ratiu is the manager of economic research for Realtor.com. He says, “As the next generation of home buyers has embraced ridesharing and short-term rentals, it’s a natural next step that they begin to think of their biggest asset — their home — as a potential income stream. For people looking to take advantage of the sharing economy, in addition to traditional approaches it may be worthwhile to explore creative solutions, such as listing your home as a vacation rental when you leave town, or renting your outdoor space or pool. Even a small amount of income each month can multiply over a year or more and can turn into bigger returns.”
Renting out a room in a home can add a little extra spending money, but many homeowners neglect to report rental income for tax purposes. That can come back to bite them in the long run with a costly tax return at year-end. Not only is it important to deduct your expenses, but you need to claim your profit. At the end of the day, a tenant in your primary residence can be higher risk than you intend.
A multi-family residential rental property could be a great solution
For those looking to offset their property tax bill, mortgage interest, or boost the bottom line, purchasing investment properties rather than an owner-occupied single-family dwelling could an even better way to generate additional income. While there’s a significantly higher initial investment required, the rewards are many times higher yet.
In a multi-family residential unit, the owner can occupy one unit and rent the others out, should they desire. In that way, it’s possible to avoid hiring a property management company. The tenant pays their own insurance and utilities, eliminating some variable expenses paid by the homeowner. And while the tenants are covering the mortgage, insurance, and property tax payments on the unit they’re occupying, the owner’s equity builds.
An option for a cash flow crunch
What happens if a tenant leaves unexpectedly or you have vacant units you didn’t plan for? Would-be real estate investors might be leery about costs potentially running higher than they’re prepared for, eating into their cash reserves.
With MBANC, that fear can be quelled. Whether you’re a first-time investment property buyer or you have a full portfolio of properties, MBANC has an Interest Only option on all mortgage products. An initial 10-year Interest Only period alleviates the pressure to make large payments on the principal amount, giving the borrower freedom to either use the breathing room to re-invest elsewhere if they wish.
MBANC has a mortgage for everyone
Whether you’re buying a primary residence and planning to rent out a room or you’re building a real estate empire, MBANC has mortgages to serve all types. Find out how you can make the most of your real estate purchase when you contact an MBANC mortgage analyst today.