Let’s discuss how turning your home into your best rental investment is a very feasible scenario.
There are many reasons you could be in a position to make this happen. Maybe it’s time to move into a larger home as your family grows or maybe you have a bunch of equity in your home and want to do something constructive with it.
Remember, the whole goal with investing in real estate is to build equity and cash flow. Taking an equity line on your home to buy a brand new BMW is the exact opposite of constructive, but I digress.
We will focus on the two scenarios I mentioned above:
Upgrading to a Larger Home
If you have been in your current home for awhile and it’s time to find something bigger to accommodate your family; there are more options than just selling your current residence to buy a bigger one.
If your finances allow it, why not buy the larger home and turn your current home into a cash flowing rental property? Obviously, the numbers need to make sense, but if they do – then boom! You’ve got yourself a rental property you are already familiar with.
You don’t have to buy a move-in ready home
This is an opportunity to add value. Since you already have somewhere you are living, you have time to repair and improve a fixer upper. Finding a home that is not desirable to the average person looking for a residence is to your advantage.
Also, since you are not flipping the home you likely don’t need to meet as strict margins for the home to make financial sense, thus giving you an edge on flippers as well.
Again, you still want to make sure all the numbers work for you, but now you are in a situation where you can customize a home to your taste, while adding value to it. Then turn your current residence into a rental that generates income.
This option is for those who are not looking to move out of their home, but want to put the equity they have in it to work.
If you have been in your home sometime and built a nice junk of equity, you may already have funds to grab a rental property at your fingertips.
John and Jane Doe have 125K equity in their home. Most banks will let you borrow up to 80%, thus they can use 100K and still have some equity in their home (which is prudent!).
With those funds they can purchase a smaller property to turn into a rental. It could be a small home or a condo, it all depends on the price point in your area. Either way, their current home is essentially providing that opportunity, thus making their home a great rental property investment in a round about way.
The point is, there are many ways to own rental property and to put our existing assets to work for us in a prudent fashion.
If you enjoy my rental property investing tips, you will love the book:
I walk you step-by-step through finding, buying and renting out a rental property. The book is your personal mentor!
Be sure to use the property calculator so you can run the numbers and buy right– my gift to you!