Should you rent out your smaller house?

“Hi Gary. We’re buying a bigger home and considering keeping our old home as a rental. Do you think that’s a good idea?”

***ANSWER:
Great question, one I hear from many of my clients. There’s no precise yes/no answer, but here are some things to consider:

PRO

1.. Real estate has been the basic building block of wealth for many well-off families. I own rental real estate and very much believe in it.

2. The house is a property you’re very familiar with, so you’re not coming into an unknown.

3. If you want to start investing, a single-family home is a simple way to start.

CON

1. If you’ve owned and lived in your home for at least 2 of the past 5 years, you can sell it and exclude up to 500K of gain (250K for singles). Once you’ve been out for too long (usually 3 years), you’ll lose that tax benefit.

2. While single family homes are a simple starting point, they are not the ideal investment.

3. If your home is in pristine condition, you may heartbroken if tenants mistreat it.

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