The VA Loan Landlord
You bought your home several years ago with your VA home loan benefit, and you likely refinanced your loan maybe a time or two during that period. Over the years, your loan balance has gradually amortized, your value has increased and you realize that you did a good thing. You've built up equity over the years and now you might be thinking of downsizing, buying something a little smaller. But you do have a decision to make: sell your current property or keep it and rent it out.
Selling Your Home
There's not much here to discuss when selling your home. It's fairly cut and dried. You sell the home to a qualified buyer, you place our profits in the bank and restore your VA entitlement to be used for your next purchase. And if you play your cards right, you can close on your new place while simultaneously closing on the old one. Talk to your real estate agent about a simultaneous closing. There's a tad more paperwork to juggle with a simultaneous closing using your VA home loan but it's certainly something that can be done, just be prepared be a tad more paperwork.
Not Selling Your Home
Okay, so you decide you want to keep your current property, watch it continue to appreciate and be a landlord. What can you expect?
The first thing to expect is a less stressful closing. With a simultaneous close, you and your real estate agent are sometimes spinning plates, keeping an eye on two closings instead of just one. Many times, buyers need their old home to sell in order to qualify for a new loan and if the old home doesn't close for whatever reason, two closings are stopped, not just one.
Another important item to keep in mind is if you keep your current property you won't be able to restore your VA entitlement. If you need financing, you'll have to go elsewhere other than the VA for your financing. The main benefit of keeping and renting out your property is not only the appreciation you'll gain over the years but someone else is paying your mortgage payment. And your homeowner's insurance and hour property taxes. How's that?
Simply put, if your monthly mortgage, tax and insurance payment is $2,000 and your rent is $2,500, your property is essentially mortgage free plus an extra $500 in your pocket. Not a bad deal, is it? Now however, you're a landlord. You have new responsibilities.
Being a Landlord
Remember several years ago when you moved into your first apartment? The carpets were shampooed for you and the unit was all cleaned up. The apartment provided you with a stove, a refrigerator and everything you needed.
Sometimes though, something didn't go quite right. The garbage disposal quit working one day. The shower didn't drain or the washing machine leaked all over the utility room floor. What did you do? You called the landlord to come and fix it.
When you're a landlord, the person to come and fix it is you. And at all hours of the night, especially so in an emergency. You will also be responsible for collecting the rent each month and making sure the house is in a good, safe condition.
Finally, when your tenants move, and they will, you need to find new tenants and start all over again. You can alleviate this pain by hiring a property manager as many owners do. Holding onto your real estate and renting it out provides some major, tangible benefits, both financial and otherwise. Just remember, there's a little more work involved.
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