:: Considerations in Renting Your House (NEW)

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Summary
Many individuals already own a home and have decided a good second source of revenue is renting out the house, or rooms within it. Some individuals purchase a house with a plan to immediately rent it out to help with the mortgage payments. There are some important considerations.

Considerations in Renting a House
1) Taxes. Renting has tax implications for landlords, as rental income is taxable by the government. Some states revoke the "homestead exemption" on your property taxes if a house is no longer owner-occupied. You can depreciate a rental property, which can offset your property-tax gain, but also be aware of depreciation recapture, in which depreciation allowances are taxed, upon sale, as capital gains.

2) Insurance. Your owner-occupied homeowners' policy likely won't cover your house as a rental. Industry experts say to expect about a 50% increase in your annual premiums once you move out and renters move in. Some also advise to set up a Limited-Liability Corporation, or LLC, and signing a quit-claim deed to turn your house over to the LLC. This will protect your personal assets, should you be sued by a tenant or guest. An attorney can set this up.

3) Patience. Your house may go unrented for a few weeks or even a few months. You need to have patience as you find your first tenant, as tenants end their leases (most leases give the tenant a clause to submit a payment and break the lease), and as you are between tenants. There are more unusual circumstances as well that you may need to adjust for, such as renting your house to a company, particularly for use by an overseas employee, where the company may require a "diplomatic clause" that allows it to break the lease with 60 days' notice.