Owning a property is the dream of many and for a lucky few who are able to own multiple properties, it can be more than just a dream but a business that generates an annual revenue that will contribute to your gross income. When considering whether or not to pursue any business venture, one needs to review and weigh up the advantages and disadvantages that come with it.
Taking the risk and becoming a landlord might seem intimidating step to take for many, especially for those who do not have a history of business acumen. However, there are ways around this like using intermediaries and paying them a commision, which works well if you’re not keen on all the responsibilities and are willing to split your profits from the venture.
Regardless of decision you make, you need to look at it from a holistic perspective. So what exactly are the advantages and disadvantages of renting your property you ask?
Let’s dive in and see, shall we? Let’s begin with the advantages:
Considering renting your home? Let’s weigh up the pros and cons
A double house payment will be removed
The money received as rental income can be used to pay the bond repayment and other expenses related to the home. This can income can be used in combination with your monthly instalments to reduce your bond payments and square your debt faster.
Renting can provide you with extra income, as long as the rent is higher than the mortgage payments or if you’re already done paying off the bond. This can also provide added financial muscle when looking to purchase another property as you can put up that additional income when applying for a loan, over and above what you earn.
Sometimes it’s better to have someone on the property
If no-one is staying in the property, the house could become a mark for thieves, vandals or squatters. The right tenant could also assist with maintaining the property if the owner has relocated to another city or province and is unable to keep an eye on the property.
The tenant could be the future buyer of the property
If the owner wants to sell their property, there is always the likelihood that the tenant may decide to purchase it. The tenant may have been renting while they were saving for a deposit or to cover other costs associated with a property transaction and could be the ideal buyer.
The rental deposit could also be used as part of the purchase deposit.
Holding a property increases positive results
Holding a property while a down market recovers can prevent the negative impact of a short sale or foreclosure, and if property values increase, the real estate might even produce a profit later on.
Now that you’re aware of the benefits lets not get carried away there is always a give and take when it comes to any business decision.
So what about the Disadvantages?
The equity may be required to purchase another home
Renting out your home will not be a feasible option if you have relocated and need the equity from your previous home in order to make the purchase.
A tenant could make it more difficult to sell
As the tenant will not benefit from the sale of the property, they might be rather disobliging during the sales progression. The tenants also might not uphold the maintenance of the home or make it challenging for buyers to view the property. If the home is vacant, it is far easier to make repairs, clean up and get the property ready for potential buyers to view.
The swing of market rents.
Market rents fluctuate, and your property may produce less rental income than you expected or even sit vacant for several months, causing financial strain. This could lead to rather selling your property seeming more worthwhile than having it vacant, with no return on your investment.
Increased tax burden
Having a second or third home that brings in a monthly income automatically increases your total monthly income pushing you up into a higher tax bracket, which means you will have to fork out additional funds to SARS each year.
Do the pros outweigh the cons?
Now that you have a firm understanding of the commitment you intend to make and see both sides of the argument its time to make your decision. Do not feel pressured or that you need to rush into making a decision, the choice is up to you and what you feel you can handle.
We hope this article helped you and you can now feel confident that you can make an informed decision on which choice will be beneficial to you, your property and your pocket.
Take the legal route
If you’re looking to evict a tenant from your property and want to avoid a long drawn out case or want to limit your risk then present your case to an eviction lawyer. As a specialist in the field of evictions, our team of lawyers will evaluate your case and give you solid advice if you have a case that will hold up in a court of law.
If you need advice on your eviction case or would like us to represent your case, get in touch with Le Roux Attorneys