Here’s Why Being a Landlord in 2018 Will Pay Off
So you may have heard about the new tax plan that was just passed. Well, for many homeowners of primary residences it doesn’t bode too well. The yearly tax deductions for the average homeowners will all but vanish. However, for investors and those that are landlords, the new tax reform may make your business that much more sweeter, here’s how.
Rental Demands Will Surge
Had trouble finding tenants in the past? Well, for years real estate companies have been promoting the benefits of homeownership. However, if the benefit of tax deductions being eliminated, homeownership just became a little more costly. This new change will drive up the demand for rentals. Experts are predicting that a comparable type of demand that has been driving up home prices will now drive up rentals.
Investors in single-family homes can write off all the expenses
Owning an investment property with tenants is now recognized as a business. This means that unlike owner-occupied homes, investors are able to write off all the expenses of owning and running a rental because the properties are considered a business. Things such as the interest on those mortgages, along with repair and management costs, are deducted from the income the property produces. Investors are now only taxed on the income generated from these properties. The investment will ultimately act as a tax shelter.
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Renters Will Still Look to Invest
The days where owner occupied homeowners taking out 2nd mortgages will most likely slow down. Instead experts are predicting a trend where renters will look to buy for the sole purpose of renting out to others. Any equity tapped would be of their investment properties. Steve Hovland, director of research at California-based HomeUnion, a single-family rental marketplace and management company stated in a CNBC report that “People that are renting may consider investing into single-family real estate as opposed to owner-occupied real estate just because the tax benefits are so much better.”
Home Prices are Predicted to Drop
Under the new tax bill, industry experts predict a drop in home prices. This could be an opportune time to snatch up potential investment properties and develop a real estate portfolio. 2018 could potentially be a lucrative time to invest in homes and become a landlord. Neighborhoods as well as larger homes that otherwise seemed out of reach could become a reality for potential landlords.
People Will Rent Longer Now
With the new tax bill going into effect, the expenses of owning a home could be overbearing for aspiring buyers. In addition the shortage of inventory could discouraging for those looking to purchase. This trend will keep renters renting, Many potential buyers have a 2-5 year plan to get credit and savings in order to purchase a home. However, with things such as mounting student debt and pricier starter homes, experts are predicting longer lease terms. Folks that had planned to purchase within 2-5 years may see their plan pushed 5-7 years if not longer. Long term leases are what landlords desire the most.