Buyer TipsHomeowner TipsSelling Tips May 24, 2023

Accidental Landlords: Low Interest Rates and Home Equity

Accidental Landlords: Low Interest Rates and Home Equity

Something interesting has been happening in the housing market lately. Accidental landlords, homeowners are becoming landlords. This is due to low interest rates and increased home value. In this blog post, I will explore why this is happening and what it means for homeowners and homebuyers.

Why are more people are becoming accidental landlords? Because of very low interest rates in 2020 and 2021! Many homeowners refinanced their mortgages at historically low rates, which lowered their mortgage payments. At the same time, home values increased a lot during this period. This means homeowners have more value in their homes. With low rates and higher value, homeowners have a chance to rent out their homes. Making extra money and covering a portion of the payment on their new home.

Because they have lower mortgage payments and more home value, some homeowners choose to keep their current homes when purchasing another. This might happen when people move because they have a new job, their family is getting bigger, or they just want a change. Instead of selling their old home, they decide to rent it out and become landlords.

Benefits and Things to Consider

Being a landlord has its benefits. First, renting out the property can bring in regular rental income. Which helps cover the costs of owning multiple properties. This money can help build wealth, pay for the mortgage, or even be used for future investments. Second, by keeping the property and renting it out, homeowners keep ownership and might make more money if the property value goes up over time.

Being an accidental landlord also means, that homeowners need to know the laws for landlords and tenants, find reliable renters, take care of repairs, and manage the money involved with renting the property. It’s important to understand the time and work it takes to be a landlord before deciding.

Having more rental properties could mean there are fewer homes for sale. Since homeowners choose to be landlords instead of selling, there might not be as many houses available for buyers. This might make the competition among buyers more intense and could even raise home prices.

Because of low rates and increased home value in 2020 and 2021, accidental landlords have become more common. Homeowners, benefiting from good financial conditions, decide to rent out their properties instead of selling them. While this decision brings financial advantages and the potential for long-term wealth, it also comes with responsibilities.

As the housing market changes, accidental landlords can affect rental prices, the number of homes available, and how the real estate market works. Homeowners thinking about becoming landlords should think carefully and get advice from professionals to be ready for the challenges and opportunities that come with it.