1. Archive

Refinance home before turning it into a rental

DEAR BOB: My wife and I are thinking of refinancing our home then renting it to tenants. What are the pros and cons of doing this? Are there any helpful Web sites? _ Fritz S.

DEAR FRITZ: It's easier to refinance an owner-occupied house than a rental property. You will get the best interest rate and loan terms as an owner-occupant. Don't tell the mortgage lender you are thinking about renting the house because your mortgage might not get approved or it may have a higher interest rate.

There are tax advantages of renting the place you live while owning a rental property. The primary reason is the non-cash depreciation tax deduction for rental property, usually resulting in a tax loss, of which as much as $25,000 can be deducted against your ordinary income (unless you have more than $100,000 annual adjusted gross income).

But be prepared for the joys of having tenants who will expect you to handle maintenance problems. A good book to study is Landlording by Leigh Robinson.

I'm not aware of any Web sites on the pros and cons of converting your home to rental status.

DEAR BOB: I have lived in a rental condo for two years. Last year my rent was raised 10 percent. This year my rent will be increased by 25 percent with my security deposit also increasing. Can the landlord increase my security deposit? _ Barbara C.

DEAR BARBARA: Yes. In the absence of local rent control or state law limitations on your security deposit, your landlord can treat you like a new tenant and raise your rent and security deposit.

Your situation shows why you should consider becoming a homeowner: You won't be subject to rapidly rising rents in many communities.

_ Tribune Media Services Inc.