How to convert your home to an investment property
When you buy a new home, you might want to keep your old place as a rental. Since there are significant costs to buying and selling, this can make good sense – but only after you’ve answered a couple of key questions.
Will your house make a good rental?
Making this decision should be based on some goals and a good strategy – ask yourself honestly if your current house fits the bill. Will it yield good results, or go up in value? If the answer is no, then you’re better off selling up and using the money to buy a better investment.
Do I have the right tax structure?
The debt on a rental is tax deductible so you’ll want to put as much into your investment property as possible. The way to do this is to sell your existing home to a Look Through Company or an LTC, which you own. The LTC buys the home at a fair market price and then borrows 100% against it. You then provide a personal guarantee to the lender using your new property as additional security.
You use the proceeds of the sale to clear the mortgage on the old property and put any extra into your new home. In this way you can move the equity from your old property to your new home.