If that "for sale" sign in your yard looks a little worn after months of inactivity, you might want to consider other revenue options.
The most obvious is a long-term rental, but short-term rentals centered around special events in your area are worth exploring. A third option -- if you still live in your house -- would be to rent out part of your abode.
Here are three rental scenarios you should consider if you have a need to bring in some extra money:
Rental scenarios
- Long-term rentals.
- Short-term rentals.
- Sharing your home.
Long-term rentals
"Many people are finding out that their house is not worth what it will sell for, or perhaps they just aren't willing to sell at the current market value, so renting is an option," says Tony Drost, owner of First Rate Property Management in Boise, Idaho. "It brings in an income and perhaps can allow the homeowner to hold on to the property and then sell it when the market turns around again."Stephen Foster, a property manager with Boardwalk Real Property Management in San Antonio, says one of the most common -- and difficult -- discussions he has with owners is how much to charge.
"I always tell people your mortgage payment has nothing to do with what you can rent it for," Foster says.
Foster often recommends that people try, simultaneously, to rent and sell a home. For some reason, putting up a "for rent" sign has often resulted in a sale for his clients.
"I have no idea why," he says.
Turning your house into a rental property means additional insurance that covers lost rent and other issues, such as liability and fire. Property managers will usually conduct background and financial checks on prospective tenants and handle maintenance issues. They may take a percentage of the rent, ranging from 8 percent to 12 percent, or they may charge flat fees for various services.
"Sometimes you'll be charged an initial account set-up fee," Drost says. "Generally, the owner pays the advertising cost to procure the tenant. Other than that, they get paid when you get paid."
There are tax advantages to converting your residence into a rental. You still can deduct the interest on your mortgage and property taxes. But you can also deduct things like maintenance costs, depreciation, utilities and insurance, says Tom Ochsenschlager, a vice president of the American Institute of Certified Public Accountants.
Depending on the market you are in, it's common for deductions to exceed the income from rent, giving you a loss on your tax return. However, Ochsenschlager warns that you must make a sincere effort to rent the property if you're going to start taking the deductions. Also, any depreciation you take will be recaptured when you sell the property, he says, and you will have to pay capital gains tax. However, you may be able to avoid that if you rented it for less than two years, Foster says.