How to Rent a Home Out to Buy a Larger Home
Some home-buyers, either because of a bad seller's market or an emotional tie to a house, will rent out a home in order to obtain their dream home. If this is something you are considering, keep in mind that it can be a pricey option that you might not be able to afford. Also be aware that being a landlord comes with challenges, and relying on renters comes with risks.
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Renting a home to buy another
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Figure out your finances. If you want to buy a new home, then figure out exactly how much you will need for a down payment and regular monthly payments. You can use the income from the renters to pay your new house payment, or if you plan on subletting, use the income to build up a down payment. This option works best if you already own your home. That way, you will not have two house payments. If you are still paying on the first home, then you must factor those payments into your financial calculations.
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Find reliable renters. You can only use the rent money to buy the home if renters actually pay their rent on time. Make prospective renters fill out an application and use a real-estate agent so that you can pull their credit reports. This will show their ability to pay their debts on time and if they have any late payments. Also, interview each of them so that you can get a personal feel for which one would be best for your home.
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Realize your responsibilities as a landlord. As a landlord, you are required to fix any problems such as plumbing, etc., in a reasonable span of time. You cannot enter the premises without the renters' permission unless it is an emergency. The renters have the right to withhold rental payment and go to court if they feel you have broken the contract. You will also be responsible for taxes and any insurance on the home.
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Prepare for the worst. While using rent to pay off your new home sounds like a good idea on paper, it can be completely different in practice. You should have a back-up plan to pay the new house payment in case renters are late or unable to pay the rent. Once a renter has begun living in the home, it can be very difficult to get them out, and the process of eviction can be costly and time-consuming.
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