Have you ever thought of turning your home into an investment property? It might be because you feel like is time for you to upgrade or for you to move temporarily to a different place. For a good reason, many people have decided to change their home into investment property. They do this because of relocation due to work or because they need a bigger house and they don’t want to sell the smaller one. It can still be that you lack finance and cannot continue to stay in bigger house that is expensive to run and you want to relocate to a small house without selling the bigger one. Trying to convert your home that you are staying in into an investment property, and give it for rent, you need to take into account financial and tax status of the home. That is, if you have made the decision to turn your home into an investment property, then you need to think of what to do with your present finances to make sure that they are tax effective. When you undervalue this, you might likely get into trouble with the offices in charge of tax. However, it does not matter the reason why you might want to turn your home into an investment property, but it is also pleasant to know that if you do it the correct way, then it a good financial decision that you are making. Although making your home an investment property seems to be a good financial solution, before jumping into making it, there are things and their effects that need to be consider
The is no doubt that your loan could take care of your need after buying your first home in which you are going to occupy. The time when you start thinking of turning the home into an investment, you should also bear in mind that your mortgage will also change. That is, if your loan was a line of credit for example, it will not be beneficial for you when you convert the home into an investment property. Therefore, when thinking of the type of loan to get, it is preferable you seek the help of a mortgage broker who will help you get the best. Lately, investment property loans have been introduced by most lenders but the rate is different from normal owner occupier loans.
Depending on the investment property, most owners are supposed to pay a certain tax for their investment. In most case, people are so fond of their house in which they live that they cannot bear losing it or selling it. Even in situation where the house becomes small, or they feel like they need to move to a better area, or they may be leaving town because of work, they cannot just leave the property because of the memories that the house holds or because they are thinking of turning it into an investment property. Being in a position that most of your debt have been paid off and you are planning to use the equity you have gathered to raise fund in order for you to move into a different resident is like being in an upside down position from the financial viewpoint. This is because, the home which you are about investing in will have small tax and a reduced debt compare to the new property you are about to move into.
Normally, we don’t have a devaluation check of the property that we own and we occupy, since any property that does not produce income is not access and no claim is given for the devaluation of the property. When moving from a property that you once occupied and turning it into an income producing property it is very important to hire the services of a quantity inspector to estimate the value of the property. The quantity inspector will provide you with the value of the property as of the time you about giving the property for rent. With this value you will be able to place a right claim on the property
There will always be that feeling of holding on to the property because you love it so much and you can dare to watch what others will do to it. Also, you might be thinking that keeping the home is save should in case things don’t work as you plan. As an investor, you must be able to detach yourself emotionally from the property before you can invest in it.
Having the right gear
Lastly, you will need to look for methods to make the investment work. That is, you must look at the positive and the negative aspect of the investment. If the property is geared positively, then you are going to make gain based on the high rental income that you are going to be receiving annually and this will enable you to pay any past loan. On the other hand, if the property is geared negatively, then you are going to be working on a deficit. Therefore, the way you want the property to be geared determine the level of finance that you have.
If you have decided that using your home as an investment property is the best option, then you should take some time to talk to other investors and try to do a complete analysis of all the costs involved. Turning your home to an investment property is advisable when you are convinced that the area that the property is located is fast growing. Try not to let your emotion make the decision for you and be commercial in the way you do things.
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