by KYW's Salil Gutt
The dismal real estate market is forcing many homeowners to rent out their homes in lieu of selling it. The expectation is home prices will recover in a couple of years. In the meantime, any income coming in will defray carrying costs.
Here are some things to consider before you press this button.
If you are sitting on a profit on your home you should be aware of the tax consequences of renting. Homeowners get a capital gain exclusion of $250,000, $500,000 per couple, if they are selling their primary residence. The IRS defines primary residence that you have owned and lived in for two of the five years leading up to the sale. In short, three years is the maximum rental period to consider.
Also rental income is taxable though you get to deduct expenses against it.
The biggest headache in being a landlord is now you are responsible for fixing everything in a hurry if the tenant requests. For many this is a deal killer.
One final step.
Have a lawyer draw up a lease that builds in protections for you while respecting the legal rights of tenants.
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