Steps to Renting out First Home

I have found a renter for my home for $300 beneath my actual mortgage
payment. As my first home, the mortgage is somewhat higher than the
going rent for rentals in my area. I am currently commuting 2 hours to
work, so I needed to rent it out sooner rather than later so I can move
closer to where I work. I have a 30 year fixed FHA mortgage on my
home.My question is what do I need to do legally to make sure that I am
renting my home legally and properly.Do I need to refinance my property
as an investment property, or can i maintain my current mortgage with a
renter. I have lived in the house approximately 2 years and I do
intend to move back once I find a job in this area again. Do I have to
form a LLC to protect myself from liabilities and to make tax
deductions? Is that a good idea, or will I be okay to just rent it out
straight without forming an LLC?

Re: Steps to Renting out First Home

In article <>,
wrote:

> I have found a renter for my home for $300 beneath my actual mortgage
> payment. As my first home, the mortgage is somewhat higher than the
> going rent for rentals in my area.

Why would you give someone $300 a month to live in your house.
Not to mention that you have expenses, repairs, and taxes to
pay above and beyond the mortgage payment. Then there is
insurance. And the risk that the renters will trash the place.

You would be far, far better off to sell the place. If you
end up with a profit, invest it wisely. At least you would be
earning a bit of interest rather than paying out $500 to $1000
per month

-john-

--
============================================================ ==========
John A. Weeks III 952-432-2708
Newave Communications
============================================================ ==========

Re: Steps to Renting out First Home

To answer your question: forming a LLC will cost money, probably quite
a bit more than getting liability insurance. The big cost of being sued
is the lawyer's fees and court costs, and you are going to face that
(if sued) even if you have a LLC. Plus, whoever sues is going to blame
you for whatever happened and sue you as well.

Asset protection should never consist of one layer, but of many: you
would need to have not just a LLC but a FLP and perhaps a trust. I
doubt you have the assets to justify that expense. Insurance is, as I
said, cheaper.

It's also tax deductible: the formation costs of a LLC are capital
costs.

I assume (to address the comments of another poster) that the tax
deductions (interest, repairs, depreciation ...) are useful to you. The
$300 may well be going towards amortization.

Re: Steps to Renting out First Home

"Axqi" <> wrote
> I assume (to address the comments of another poster) that the tax
> deductions (interest, repairs, depreciation ...) are useful to you.

Huh? All of his deductions except depreciation are costing him more than
they're saving him.
--


Rick Hess
New Orleans
To email, eliminate All_Spammers

Re: Steps to Renting out First Home

<> wrote in message
news:

Do I need to refinance my property
> as an investment property, or can i maintain my current mortgage with a
> renter. I have lived in the house approximately 2 years and I do
> intend to move back once I find a job in this area again. Do I have to
> form a LLC to protect myself from liabilities and to make tax
> deductions? Is that a good idea, or will I be okay to just rent it out
> straight without forming an LLC?

You do not have to do anything with the current mortgage or make any legal
arrangements whatever. Just keep on paying the mortgage as before. If you
intend to move back into the house in 2 years, by all means keep it and rent
it in the meantime.

Re: Steps to Renting out First Home

> You do not have to do anything with the current mortgage or make any legal
> arrangements whatever.

Assuming the mortgage permits it. Some of mine do, others don't.

> Huh? All of his deductions except depreciation are costing him more than
> they're saving him.

Huh? Non sequitur.

Re: Steps to Renting out First Home

"Axqi" <> wrote in message
news:

> Assuming the mortgage permits it. Some of mine do, others don't.

I have never come across a mortgage that makes any restriction as to the
future use of the property once the loan has been granted.

Re: Steps to Renting out First Home

The only legal step you need is to call your county office and have
them remove the 'owner-occupied' exemption from your home for your
property tax calculation. I am not sure if they have their way of
finding this out , but in any case it would be illegal to claim an
exemption that is not true. Also you can't just look at mortgage
payment and rent to calculate if you are making money. you will make
more money absorbing a negative cash flow for a short term then a
positive cash flow for long term.

Re: Steps to Renting out First Home

"Don" <> wrote in message
news:V8tOe.193735$
> "Axqi" <> wrote in message
> news:
>
>> Assuming the mortgage permits it. Some of mine do, others don't.
>
> I have never come across a mortgage that makes any restriction as to the
> future use of the property once the loan has been granted.

The owner may well need to notify his/her insurance company, however. When
we moved out of our house and rented it we had to find another carrier for
hazard and flood, as our original policy wouldn't cover tenants. OP: call
your insurer to make sure your coverage will apply should you move out of
the house.

Donna

Re: Steps to Renting out First Home

"Donna" <> wrote in message
news:HSLOe.3076$

> The owner may well need to notify his/her insurance company, however.
> When we moved out of our house and rented it we had to find another
> carrier for hazard and flood, as our original policy wouldn't cover
> tenants. OP: call your insurer to make sure your coverage will apply
> should you move out of the house.

Yes, absolutely, check the insurance coverage. And it may be a good idea to
increase the liability coverage. (And don't forget to have the water and
electricity and heating oil or whatever transferred to the tenant!)