Recently, the team at Ben Frederick Realty got together digitally to present a webinar on house hacking. House hacking is the practice of purchasing a property where you both live, and rent a portion of it out. Our team members highlighted the benefits of owner-occupied rental properties, and things to consider before becoming a landlord. Read up on our full highlights below, and don’t forget to check out the webinar for a more in-depth guide to live-in investment properties in Baltimore city.
The Four Benefits of Owning Real Estate
The team opens the webinar highlighting the four primary benefits of owning real estate over simply renting. They are as follows
Stable Housing Costs
Although purchasing a home requires more upfront expenses, homeowners tend to save money over time due to the stability of their payments. Landlords are able to, and often do, raise rents over time, meaning that the initial rate you start renting at likely isn’t where you’ll end up. These rates are adjusted to meet what the landlord considers the property to be worth, a factor which you have little control over. If you are able to secure a good mortgage rate, you can look forward to stable and typically cheaper monthly payments than what you would see as a renter.
Freedom and Control
When you become a renter, you give up a lot of control over the place you live that you would have as a property owner. Want to make changes to the property? Unfortunately that’s not allowed. Remodeling duties are the choice of the landlord. Many properties don’t have pet insurance, meaning you may not be able to bring your furry friends to live with you. Even simpler additions, such as adding your own washer and dryer, may violate your lease terms. As a homeowner, you get to make the decisions about how your property is handled.
Homeowners have access to a variety of tax benefits that renters don’t. By utilizing deductibles, you can reduce the expenses of things such as property taxes. If you use your property for rental units, you can also deduct expenses for property repairs and some improvements. In some areas, first time buyers are even granted local tax breaks to help shoulder the new expenses.
Perhaps the most significant advantage of owning vs. renting is that you earn equity. When you pay your down payment, you’ve already created substantial equity based on your downpayment amount. And that equity only continues to grow over time with successful mortgage payments. Equity can help you take out new lines of credit, apply for loans, pay off bills, take a much-needed vacation, and so much more. Equity is a crucial aspect of homeownership.
Is Being a Landlord Right for You?
So, the benefits sound great. The next question is if owning and operating a rental property is right for you. There are a few considerations that have to be taken here.
Separating Personal and Business Relationships
When you’re living in the same property you’re renting, it’s likely that you’ll form relationships with your tenants. This is a great thing, but it’s also important to be able to maintain the business side of these relationships. Rental payments are tied to your mortgage payments. So, it is important to ensure all tenants pay on time, are trustworthy with how they handle the property, and follow the terms of the lease.
Handle or Hire Maintenance
As the landlord, it will be your responsibility to address the maintenance needs of units you own. If you’re handy, you may be able to do it yourself or learn some simpler fixes for more minor issues. If not, it’s important to be able to hire out trustworthy maintenance services to meet the needs of your tenants.
Save for Emergencies
Unexpected expenses can arise at any time. Whether it be a damaged septic tank or an aged roof, large expenses can hide unseen until they need to be taken care of. Each month, it’s crucial that you put money away to prepare for these emergencies so they can be properly handled if they arise.
Check Out the Full House Hacking Webinar to Learn More!
These are just a few highlights of things covered in our extensive webinar on the benefits of house hacking. In the video, we give you clear breakdowns of how the finances can work out for rental properties where you live. We also check out some of the options currently available for purchase from the Ben Frederick Realty team. Check out the full webinar. Or, if you’re ready to get started on your property investment journey, contact the BFR team today!