Should You Sell Your Home or Turn it into a Rental?

By Richard Warner

I have been an investor and landlord for 5 years. When I got my official real estate license, I started as a First Time Homebuyer Specialist and have since received specialization certifications in Luxury Homes, Probate, and Divorce.

How do I get the most money out of my home? There are two main ways for homeowners to get money out of their house: sell the home and get their equity out of it or convert it from a primary residence into a rental. Your primary residence is where you live. Most of the time, it’s the address you have listed on government documents, such as your driver’s license or tax returns.

If you plan to convert your primary residence into a rental, consider these three things. First, If you haven’t paid off your mortgage, speak with your lender. Some primary residence loans cannot be used for investment purposes, and you may need to refinance them or wait until your mortgage is paid in full. Second, you must have lived in your home for at least 12 months before converting it into a rental. Finally, Check local laws and HOA regulations to make sure it’s legal for you to make this switch.

Rentals have been rising all over the country, so you might be able to get more money from your rental than you think. It really depends on how much your mortgage payment is. Finding a good tenant is crucial. Ideally, you want someone with a long lease, good financial standing, and respect for the property. You might need to offer competitive rent and a well-maintained space to attract renters.

Another benefit of rental properties is tax benefits, including depreciation expense, which allows you to deduct a portion of the property’s value for wear and tear, potentially reducing your taxable income. I suggest you consult with a tax expert to address your situation.

Unfortunately, turning your primary residence into a rental has some downsides. One drawback is potentially losing your capital gains tax exemption when you eventually sell. Consider a 1031 exchange to reinvest the proceeds into a similar property and defer those taxes. Maintaining a rental property can also be demanding. You might receive calls at odd hours for minor issues. Additionally, managing a distant property can be inconvenient, especially when scheduling repairs or tenant turnover.

The truth is that whether or not it makes sense to convert your primary residence into a rental depends on your situation. I’d be happy to offer a free consultation to discuss your options, manage applications, and even meet service technicians at your rental property to save you time and money. If you have any questions, feel free to reach out. Call me at (502) 338-2861 or email me. Ultimately, I aim to earn your business and help you achieve your real estate goals.