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Should you rent out your AZ golf home? Tax benefits and downfalls

In part one of “Should you rent out your AZ golf home,” we looked at why renting your home rather than selling it may make good financial sense, especially in the long run. Rental listings in the MLS are becoming more and more scarce, indicating that there is a low supply. That, on top of rental rates rising, makes the thought of renting even more appealing. Plus, there are the tax benefits.
Tax Advantages
In addition to deducting your mortgage interest and real estate taxes, landlords appreciate some extra tax advantages. You can write off the operating costs to run your rental “business,” like lawn and pool maintenance, repairs and association fees.
The best tax advantage on your residential rental property is that you can depreciate the cost of the AZ golf home over 27.5 years, even if the property is increasing in value. That deduction frees up some business cash flow that you do not owe taxes on.
Downfalls of Renting
While there are benefits to renting out your home, those come with some obvious pitfalls. For instance, if you have a month or two without a renter, you will be paying the mortgage and expenses on your own. Then there are the renters to deal with. You could get lucky and sign the perfect tenants. However, you could get renters who are constantly late with payment or who damage your property.
Hidden Costs to Renting 
Think of renting your property and becoming a landlord as starting a business. If you already have your own business or are in the business world, you know that there are hidden costs just to operate the business. Consider your time to make repairs, list the property, and manage payments. You may also need to set aside a marketing budget to attract the best tenants at the highest rate possible.
One way to alleviate many of these renting downfalls and your concerns is to hire a property management company. You’ll pay a fee or percentage of the rent, but you will have very little to do when it comes to the month-to-month operations of the property. A typical property management fee is 3 – 10% of the rent. Though even with a manager, you will still need to pay for repairs and sometimes marketing.
The Financial Breakdown
It is recommended to set aside up to 30% of rental income for maintenance and repairs. Then after your property management fee, that leaves 60-70% of the rent to cover the mortgage and other expenses.
Look at comparable AZ golf home rentals in the area to determine what you could set the rent at, then subtract that 30-40% for fees and your expenses.  If you’d be cutting it close or losing money, especially if the property goes empty for a month, then renting your home may not be for you. But remember to consider the tax benefits and the loss if you are trying to sell your property for months with no interested buyers.
Rentals can reap big rewards and help you live more comfortably or even become an investment business. They can also drive you crazy with unpredictable tenants and costs. We always recommend speaking with a trusted real estate professional before making any big decisions on your AZ golf home. It’s also a good idea to get a property valuation to first determine if selling is your best option. The Matheson Team knows Scottsdale golf homes and the comparable properties in Arizona golf communities – we’re always here to help and answer questions!
Don Matheson
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255
[email protected]
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