I own a home, but I would like to move and rent out my home. What’s my best option?
I own a home that I bought only two years ago. In five years, I would like to relocate to Nevada. I’d like to rent out my existing home to have some net income, but I also would like to purchase another home in Nevada. I have no savings for a down payment for the new home. What would be my best option?
Submitted by Lisa C.
Congratulations on thinking ahead to your future goals and building the wealth to achieve them! Five years is a great timeline to set up a S.M.A.R.T goal.
What is a SMART Goal?
Those letters stand for: Specific, Measurable, Achievable, Realistic, and Time-bound. Use this as a guide to planning out your goal:
- What do you specifically want to do?
- How will you measure that you’re doing it?
- Is this goal achievable and realistic for where you are currently?
- Will you be able to achieve it in the time frame you want?
Crunch the Numbers
Start by doing a little research to figure out how much you may need for a down payment on a new home.
Take the amount you want to save for a down payment and divide it by 5. This will give you an amount to save each year. Then take that amount and divide by 12. This will give you an amount to save each month.
Determine if you can realistically save this amount each month to help cover the down payment. If the amount is too high, start thinking of creative ways to earn extra money so you can reach your goal. Or, set a price range for the future home that gives you flexibility in how much to save.
Research the Rental Market
Next, research to find out if the current rental market will bring enough revenue to cover the mortgage payment on your current home. If so, you may want to rent it now for six months to a year to see if you really want to be a landlord. Being a landlord has its pros and cons. Having a “landlord” experience before you move could help you decide if you want to be a long-distance landlord.
Finally, over the next five years, watch the housing market in Nevada and the rental market in your current area to see how the prices fluctuate and determine how any changes will affect your plan.
Saundra Davis is a nationally recognized financial coach and educator. Her experience in the U.S. Navy, where she made every money mistake possible, and her 20 years serving community-based organizations led her to the reality that the best way to help people find a path out of poverty is to help them become their own financial expert.