What You Should Know About Being a Landlord

Offset a new home purchase with rental income from the old one.

Did you buy a house or refinance one in recent years, and have an incredibly low interest rate, but it’s not a house that you love? You rushed into getting something or you're wanting to get a bigger house or a smaller house, but the low interest rate makes you feel like you can never move.

Our idea is to invest in a new property as a primary residence to get the lowest interest rate that you possibly could right now, and then rent out your current property so you'll be able to hang on to that low interest rate and try out being a real estate investor.

"Take advantage of the tax break."

Most lenders can use 75% of that rental income to add to your income, so your debt-to-income ratio should offset the second mortgage. When buying a primary residence, you'll get a lower interest rate versus purchasing an investment property, so it makes sense on both ends to try it out for a couple of years.

If you decide within two years that you don't like being a landlord, then you could sell that property. The current IRS rules state that if you live in a property for two years and then sell it, you can make up to $500,000 as a married couple and that money will be tax-free. So as long as you don't treat it as a rental for five years, then you should be able to go back and still take advantage of the tax break. Talk to your tax adviser to find out more about your specific situation. 

If you'd like to learn more about investing ideas or if you have any questions, reach out to us by phone or email. We look forward to hearing from you.