One of the best long-term residential real estate investing strategy is home leasing. Home Leasing, also known as renting homes, is when a tenant pays the investor a monthly rent that is used to pay the monthly mortgage on the property.  In the ideal situation the rental rate will be higher than the mortgage and the investor gets to keep the extra cash, known as ‘positive cash flow’. If the rent is lower than the mortgage, the investor will have to make up the difference that is paid on the mortgage each month, this is called ‘negative cash flow’.

The major disadvantage to home leasing is that your tenant could stop making payments at any time, they may make their rental payments late, or they may cause lots of damage to the property which leaves you with the rehab cost all while there is no tenant to pay the mortgage while you are repairing the home. Regardless of what a tenant does, or does not do, the investor must continue to pay for all necessary maintenance and repairs and pay the mortgage even while the home is vacant between tenants.

In most cases, only homes with a lot of equity (that could easily be sold through many of the programs we offer) are the homes that can generate enough rent to pay the carry costs on a home. Additionally, most people don’t want to be landlords. For these reasons, few homeowners that need to sell end up home leasing.

We recommend only using home leasing as an investment strategy for those investors want to hold onto a property long-term and are financially stable enough that they could lose money on the property short-term.

 

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There is an extensive list of issues surrounding home leasing, from figuring out the taxes, cashflow, liability issues, insurance, and rental agreements.  Our suggestion is to seek the professional services of a property manager if you should decide to rent your home.