Gino Blefari, Senior Vice President of HSF Affiliates, HomeServices of America, Inc
A growing number of homeowners who are looking to move are choosing to hang onto their homes and rent them out instead. Call it the rise of the accidental landlords.
In many cases, they either purchased or refinanced in the last few years and snagged an incredibly low interest rate. Redfin reports that 19% of current homeowners either purchased or refinanced homes between 2011 and 2013, when rates were historically low around 3.4%
And when the going market rate for rent can cover your monthly mortgage and tax payments with profit to boot – well, what an amazing way to put extra money down to pay off your mortgage!
Or, as noted in this CNN Money story, some homeowners who are still underwater on their mortgages are finding that renting at least helps soften the financial blow while enabling them to move to a bigger house.
Being a landlord indeed seems like it’s working out for many homeowners.
There are considerations in being a landlord, though. Tenants can be demanding. You have to be comfortable shelling out money for regular maintenance and repairs. You’re on the hook, even when your property is vacant and not providing income.
Being a landlord also will impact your income taxes, which is why it’s a good idea to check in with an accountant or tax preparer before jumping in.
Another thing to think about: If you’re moving out of the area it can be a challenge to manage a second property, creating the need to hire someone to help.
It’s definitely not for everyone.
The Big Picture
With more owners deciding to hang onto their properties instead of selling, you have to wonder about the impact on the overall housing market.
For-sale inventory is affected for sure. For every owner who decides to become a landlord, there’s one less home on the market for eager buyers.
On the other hand, this is good for renters, who in some areas are a growing demographic.
We don’t anticipate huge changes in housing inventory due to the rising landlord trend. If anything, it’s a wonderful thing for those owners who can profit or help close their equity gap in the next couple of years. And who knows – they’ll either love being landlords or they’ll be more than eager to sell after a couple years playing Mr. Furley.