Some homeowners receive an ongoing revenue stream from renting out some part of their house. The extra income is then available to pay a portion of the costs of home ownership. Prospective home buyers who are interested in renting out a small part of their future home may want to focus their search efforts on certain types of properties for sale.
The income from a renter can help defray the cost of mortgage payments and property tax. However, most homeowners likely prefer not to share their private living quarters. If you are willing to accommodate a renter, you probably want to ensure that the renter has a separate living space with a separate residential entrance. The following information is something you should consider before making the transition.
You don't necessarily have to rent to a complete stranger. The best method of locating a suitable renter is through personal referrals. Your friends and relatives may have enough personal contacts to refer potential renters your way. Even if a renter is trustworthy and quiet, a certain structural layout is necessary to accommodate the both of you.
Separate kitchen and bath
The living quarters for a renter is often a converted space such as a garage apartment or a finished basement. To maintain your own private living space, the renter's quarters should have its own kitchen and bathroom. Unless you are able to arrange for electrical and plumbing upgrades, focus your home search on properties that already contain a kitchen and bathroom in the renter's living space.
Revenue received from the rental of a small part of your house is considered taxable income. However, expenses attributable to the rented space can be deducted from the rental revenue to reduce taxable income. Certain deductible expenses must be allocated between the rental space and your own household living space.
A portion of your mortgage interest, property tax, and home insurance can be deducted from the rental revenue. An acceptable method to apportion the expenses is to divide the square footage of the rental space by the total square footage of your home. Mortgage interest and property tax that is not deducted from the rental income remains a personal itemized deduction.
Expenses that are attributable solely to the rental space are deductible in full, such as painting or routine maintenance. The tax form used to summarize and report residential rental income on your Form 1040 is IRS Schedule E.
Another factor to consider when evaluating homes is the amount of parking space available for automobiles. Contact a real estate firm for more advice on comparing real estate for sale.Share