Friday, August 05, 2005

Keeping a Current Home as a Rental Property
Could Turn Out to be A Valuable Investment Opportunity

Consider the possibility of keeping your current home as an investment property. Consider renting to someone else after you move. And think about how it will appreciate over the years; become a “savings account” for the future.

Most people must sell their current home in order to buy the next one because they will tell you that “two mortgages at once just is too much”... However, as you investigate the possibilities with your mortgage originator, you may discover that you can qualify for a new mortgage while keeping the previous mortgage.

Consider this:
1. It IS possible to count a large portion (perhaps 75 percent) of the rental income from your current home toward your qualifying income for the mortgage on the new house. You will need to have a year’s lease signed, and show a written accounting of income and expenses related to the house. Talk to your mortgage originator about the requirements, as these rules vary by lender. We are happy to supply you with the contact information for several excellent professionals if you are interested in this avenue of real estate investing. Just let us know at

2. You may be able to refinance your current house in order to free up accumulated equity to roll into the new house. Again, talk to several mortgage originators to explore the possibilities...

3, Many of your expenses (including losses) connected to your rental may be tax deductible. It is important for you to consult a knowledgeable accountant to make sure you understand all the tax implications of having a rental. We are happy to supply you with the contact information for several excellent accounting professionals. Just let us know at

Collect all the financial facts, and then figure out what the projected return on your investment would be if you kept your house as a rental. Don’t forget to take into consideration as a cost what you could make on the money in other ways (known as the “opportunity cost”). For example, you could put the money into a Self-directed IRA or into your new house instead. If you need help with this, a financial consultant or a CPA can help you. Carolina Real Estate Investors Association (CREIA) is a local educational and networking group that may be a valuable resource to you. We have had positive experiences with this group and associated advisors. We are happy to supply you with contact information here, as well. Just let us know at 1031@janeAnne.com

Many investors are happy to break even or take a slight loss on their rentals in the early years, understanding that the profit comes later when rents can be raised, and at the end when the mortgage has been paid off and/or the property is sold. During those years, the property has (we hope!) been appreciating. As a real estate investor your baseof paid up rental properties can be a lucrative retirement plan.

Before you take the step of becoming a landlord, investigate the rules in North Carolina and your city, if applicable. There are a lot of rules, such as how to advertise, write leases, and maintain a special checking account to hold security deposits. You will want to know Housing Certificate rules that apply inside some cities including Asheville and Black Mountain, and about eviction processes.

Best advice: Ask yourself if you really want to do this.
1) Do you have the time and the interest to deal with the day-to-day issues that will arise?
2) Will you manage the property or pay someone to manage this for you?
3) Do you have good fix-it skills or contact with folks who do?
4) Are you a person with the patience to learn new skills and responsibilities and take on an investment that will yield only long-term returns?

If so, join the large group of folks who know that property rentals can be a great investment and let us be your guide to excellent properties for today and tomorrow.

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