The Accidental Landlord

COVID-19 had impacted the world in more ways than one. One of the unexpected effects of the pandemic had been the unprecedented low-interest rates that it had provided. The low rates presented an excellent opportunity for those looking to buy a house or refinance, as it had become easier to afford a home with the unprecedentedly low interest rates. While most people consider purchasing a new home and selling their previous one, there is another option to consider for those who purchased during the Covid-19 interest rate market environment. Those who had purchased a house during COVID-19 with low rates should become accidental landlords and cash flow from their existing home. This way, you can move into a new home more suitable for your current living situation, without selling the old home that was able to lock in ultra low rates. There are a lot of grey areas to investing and home ownership, so I want us to explore what it would look like to be an accidental landlord and the benefits of doing so.

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” — Franklin D. Roosevelt

What is an Accidental Landlord?

An accidental landlord is someone who did not initially plan to rent out their property, but decide to do so due to personal circumstances. For most, the thought of being a landlord never came to mind, but with unprecedented interest rates from the pandemic, many are choosing to rent out the house they acquired or refinanced during the pandemic.

Cash Flow from Your Existing Home

The first step towards becoming an accidental landlord is to rent out your existing home. Everyone can agree the interest rates that were offered during Covid are not historically normal. So, even if rates were to drop back to 4–5%, does it ever make sense to sell a home that has rates between 2–3%? If you decide to keep your home with the low rates, you can generate passive income through rent while still owning the property. The amount of rent you charge should take into account the prevailing market rates, the condition of your home, and other relevant factors. Also, it is essential to set aside some funds for repairs and maintenance as you will be responsible for these expenses. Becoming an accidental landlord can help you generate income that can be used towards your new home, savings, or other investments. Based on most rental rates, it may be reasonable for most to cash flow $1,000 a month on their property.

“You have two choices: sell your home and free up equity or turn it into an income-generating property. The choice you make depends on your financial needs and situation.” — Andrea Browne Taylor

Moving into a New Home

While becoming an accidental landlord will help you generate some income, it is also important to choose a new home that is more suitable for your current living situation. This could be a bigger home if you have a growing family or a home that’s closer to your work. Keep in mind that even with the cash flow being generated from your first home, you will still continue to pay off the mortgage on your old home, so your new home should be within your budget.

“Real estate is an imperishable asset, ever-increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.” — Russell Sage

Refinance with Lower Rates

After you’ve become an accidental landlord and purchased your new home, you can refinance in the future when the market presents an opportunity to do so . As the interest rates lower in 12–24 months, you might be able to get a better deal compared to what you had before. This can help you save money on interest payments and reduce your monthly payments in the future.

“The bottom line: investing in real estate is smart because property is tangible. People always have, and always will, need shelter.” — Kathy Fettke

Benefits of Becoming an Accidental Landlord

1. Additional Income

The most obvious benefit of becoming an accidental landlord is the additional income it can provide. With tenants paying rent, you can cover your mortgage payments and potentially generate a profit. Due to the low interest rates acquired during the pandemic, cash flowing from those properties is pretty easy for most.

2. Maintain Ownership of Your Property

By renting out your property instead of selling it, you are able to maintain ownership and benefit from any potential appreciation in value in the long run. This can also be a valuable asset to pass on to future generations while you capture the monthly and annual cash flow from the property.

3. Flexibility

As an accidental landlord, you have the flexibility to choose when and how long you want to rent out your property. This can be helpful if you are only looking for temporary solutions during difficult times or begin to enjoy the financial opportunities that come from renting out your property.

4. Tax Benefits

Renting out your property allows you to deduct various expenses from your rental income, resulting in potential tax savings. These can include mortgage interest, property taxes, insurance, and maintenance costs.

“Now, one thing I tell everyone is learn about real estate. Repeat after me. Real Estate provides the highest returns, the greatest values, and the least risk.” — Armstrong Williams

Although becoming a landlord is not desired by everyone, but by becoming an accidental landlord it can be a great way to take advantage of the current scenario you are in. By keeping your existing home, you can generate passive income while still owning the property. This income can be used towards your new home, savings, or investments. Additionally, when interest rates do fall in the future, you can refinance your new mortgage, further reducing your monthly payments and generating the potential for additional financial opportunities. Remember to take into account your finances and choose a new home that is still within your budget. With the right approach, becoming an accidental landlord can be a smart financial decision for those who purchased homes during COVID-19.

This is not financial advice. For educational purposes only. Before making any financial decisions, consult with a professional.