One of the most-discussed topics with clients this year has been something along the lines of: "We are dabbling with the idea of renting our house out instead of selling, and then buying our new home, how would that impact my home purchase?" or, "is there any way to move my current mortgage rate over to my new house?" Sadly, I can't help with the second question, but the first is an awesome opportunity current homeowners have. 

Recently, a client I was working with found out their total net worth would be predicted to increase $130,905.99 over the next 5 years if they would choose to keep their home and rent it out  - which is why this is such an exciting opportunity for you, or someone you know!

*Quick note: If you do not yet own a home, or if a friend or family member is in this position, you can still plan ahead for your next TWO purchases. (Buy your first house, live in it for a while, rent it out, buy your next house)*

A few quick notes:

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1. Even if you've already bought a home and are not considered a "first time homebuyer" any conventional-qualified homebuyer can do a 5% down payment for every subsequent home purchase. So, if you do end up keeping your home and renting it out, you don't have to worry about not being able to access your current equity for down payment.

2. If you DO want to access your current equity, you can easily take out a home equity line of credit before moving out, accessing your equity up to 80-90% of your home's value!

I have a very easy-to-use spreadsheet that compares the benefits of keeping your home and renting it out, versus selling it, and using the profits as a down payment, thereby reducing how much you'll pay in mortgage interest on your new home. Click here to take a look at the spreadsheet.

Being a landlord can be a lot of work, so let's do a re-cap of the benefits:

It's possible to buy a new home and keep your current low-interest rate through a strategy like renting out your existing property. This can offer various financial benefits, such as monthly cash flow, property appreciation, mortgage amortization, and tax advantages through depreciation.

Here are some key points to consider when pursuing this strategy:

1. Rental Income - Cash Flow: By renting out your current home, you can generate monthly rental income that will ideally exceed your housing expenses. This can contribute to positive cash flow.
2. Property Appreciation: Real estate has the potential for property appreciation, which can add to your overall wealth. Keeping your current property may allow you to benefit from any increase in its value over time. We are predicting a conservative estimate of 3-5% this year in Southeast Wisconsin.
3. Mortgage Amortization: Your tenants' rent payments help you cover your monthly mortgage payment, which contributes to paying down your mortgage balance, effectively building equity and wealth over time.
4. Tax Benefits Through Depreciation: Depreciation is a tax strategy that allows you to deduct a portion of the property's value each year, reducing your taxable income. This can create a tax loss on paper, even if you're making a profit in reality.
5. Passive Income: Managing rental properties can be time-consuming, but there are tools and strategies to make it more passive and hands-off. Utilizing property management services or tools can help streamline the process. I personally self-manage, and I have plenty of automations (automatic monthly rent and late payment collection) and tracking systems to keep myself organized.
6. Massive Wealth Generation: I was able to help a client see that their total net worth increase forecast over a 5-year period would be $130,905.99 if they chose to keep their home and rent it out, versus selling it and using the proceeds as down payment (which would only save them $47,452.24 in mortgage interest). In fact, if you compare the two options, they come out ahead by $83,453.75 by choosing to be a landlord!

It's important to note that while this strategy offers potential benefits, there are also risks and responsibilities associated with being a landlord. Understanding local rental laws, maintenance costs, and having contingency plans for vacancies or repairs is crucial.

If you're considering this approach, consulting with a financial advisor or real estate professional can provide personalized guidance based on your specific situation and goals. Keep in mind some mortgage types or lenders do NOT allow you to move out and rent out the property, if you had purchased it originally as a primary residence. 

See a snippet of this excel spreadsheet you can download and play around with to help determine your exact scenario! If you'd like to set up a call to discuss your scenario, I would love to do that with you! Text me at 414-488-0438 to get it scheduled!