what is the benefit of renting out my town home

[Chenna Marri]

Hi,

I am planning on renting out my town home but I don't see any benefit in doing so. I tax rate is 28% , so I will end up paying the same percent on rental income. Say for example my total mortgage payment is 1500 out of which 1000 is interest. If I rent my home I need to pay (say I will rent for 1600) around 5400 in taxes and if I add any repairs on top of it for general maintenance what am I even really gaining by renting out. I am actually losing money.

Can some one let me know if I am correct with my analysis or If I am missing something?

Thanks for your help and time.

Chenna

[Kirsten Sitnick]

Hi Chenna, if your mortgage is $1500, and you can rent for $1600 it sounds like you will lose money. Stuff happens. You will have repairs, you'll have months with a vacancy, things like that. If you're hiring a property manager, in my area (Baltimore) they charge 10% of rent; is it the same in your area? Even if you manage it yourself, you can expect that things will go wrong, and you should have the reserves to handle that. Your tenant is paying your mortgage balance down, and you may have your property value increase, but do you have the reserves to wait that out?

--Kirsten