3 Things to consider before renting out your first home
You just bought your first home but aren’t ready to move in, so is it worth renting out the property for a few months? Here are 3 things to consider.
As property managers, we are sometimes approached by first home buyers who wish to temporarily rent out their newly purchased property before moving into it.
There may be a number of reasons for wanting to do this, but generally it comes down to one of two: either the buyer is currently renting a property and committed to a fixed term lease that extends beyond the date of settlement; or, the buyer is living in rent-free accommodation and wants to save up some money before moving into the new home.
While it might seem desirable to earn some rent before taking on the full responsibilities of home ownership, there are some important risks worth noting.
Firstly, it may be very difficult to attract quality tenants for very short term lease. Most renters prefer the stability of at least a six-month or twelve-month lease because of the cost and effort involved in moving from property to property.
Secondly, there are a number of costs associated with setting up a new lease, such as the letting fee, advertising costs, and the fee for preparing a Property Condition Report. These costs can make the exercise of renting out your property on a short term basis less viable.
Thirdly, there is a risk that the tenant is slow to move out, which does happen on occasion, and the legal process required to evict the tenant, while effective, can take some time. This can cause serious problems if the buyer has claimed the First Home Owners Grant and is therefore required to occupy the property within a set time frame.
Clearly, what seems like a good solution can easily prove to be more hassle than it’s worth. And this is without factoring in the potential tax implications of renting out a home. If you rent it out prior to living in the property, then some proportion of any gain may be subject to capital gains tax. This is not something to take lightly.