Investing in Real Estate – Why People Rent Their Starter Home
It’s a typical mistake for homeowners to sell their home when moving to a new house. Remember that you don’t always have to let go of your real estate, especially since it can be a valuable long-term investment. Instead of jumping from one property to the next, you can consider renting your current home to pay for your next one.
Maintaining two home properties
Buying a starter home is what many first-time homeowners do to save up enough money for better living conditions. This doesn’t mean that starter homes are less than decent. If you maintain your house well, you can make the most out of your mortgage by investing it in the market.
It might seem more straightforward to let go of one property to focus on another. Although maintaining two properties has increased weight in paperwork, there are numerous advantages of renting out your first home. Sometimes, its placement in the market and geographic advantage can be a valuable asset.
Diversify your income stream
The property market is always fluctuating, even with the development of multiple high-rise condominiums and suburban communities. This is why maintaining ownership of a property can be a profitable investment, even if you didn’t intend for it to be one. Renting your starter home is an excellent way to maintain a sustainable income, while you’re still stabilizing your financials for your second home.
Leasing your house is an excellent addition to your income stream, as long as your rental fees cover your mortgage payment and other homeowner expenses. For locations that rarely have permanent residents, you can have a high chance of finding potential renters.
The difference between selling to buyers and renters
Potential renters could just be looking for a place to stay until they can find and save up for a permanent long-term residence. These people aren’t as picky as home buyers when it comes to damages and its interior design. Remember that what your selling is the location and functionality of your living spaces. This means that you should focus your repairs and renovations on your amenities.
On the other hand, marketing to permanent residents requires you to invest in the beautification of your property. Although it will come with more expensive costs and longer wait time for sale, you can also ask for a higher price once you put it on property listings.
How your living situation will change your mortgage preferences
Simultaneously moving to another home while refurbishing your previous one will require you to balance out your financials. Choosing the right home loan can help you manage your expenses. If your current mortgage has clauses against reclassifying your primary residence into a rental property, it might be better to refinance to a different loan.
Lenders often ask for a 20% down payment to fund your second home’s purchase. Although smaller down payments are available, you will pay for a higher interest rate as a consequence. Remember to note the differences in financing multiple properties before you end up in an unprofitable situation.
The best way to make the most out of renting out properties is to set reasonable rent that’s competitive and profitable for your needs. Just like any real estate contract, getting pre-approval is the best way to get easier financing for your purchases. This will help you plan out your budget calendars so that you can ensure a positive turnout in maintaining both investments.
Getting expert financial advice is the best way to ensure that you aren’t making the wrong investments. If you’re looking for mortgage professionals in Colorado to help you with your home purchase or refinancing, we’re the right firm for you! Schedule an appointment with us today, and we’ll handle your transition to a new home.