Posted by Judit Crace on Wednesday, February 19th, 2025 5:00am.
Idaho’s real estate prices are going up, and interest rates are high. So, buying a rental property for investment might not make sense right now. If you bought your home years ago at a lower price and interest rate, you might think about renting it out when you buy your next home. This strategy can seem appealing, but is it the right move?
Let's look at the benefits and drawbacks of making your Idaho home a rental. This will help you decide if keeping it is a wise financial choice.
1. Low Mortgage Payment = Higher Cash Flow Potential
If you bought your home before prices went up and interest rates climbed, your monthly mortgage payment is likely low. Renting out your home at current rental rate, would most likely result in positive cash flow. It's nearly impossible to buy a home today with current prices and mortgage rates.
2. Long-Term Appreciation
Idaho's housing market has grown a lot in the past ten years. Growth might slow down, but that's unlikely. Keeping your home could still increase in value over the long term. If home prices continue to rise, you’ll build even more equity while collecting rental income.
3. Tax Benefits
Owning a rental property comes with several tax advantages, including deductions for:
These deductions can offset rental income, reducing your overall tax liability.
4. Flexibility for Future Plans
If you're moving but unsure about selling your home, you can rent it out. This way, you can keep it as an asset. This give you options in case you want to move back in later or sell when at a later time.
5. Strong Rental Demand in Certain Areas
If your home is in a high-demand place like Boise, or Coeur d'Alene, you shouldn't have trouble finding tenants. Population growth in these areas means many people are looking for rental homes. This helps you keep your property rented and generate income.
1. Landlord Responsibilities
When you own a rental, you become a landlord. You’ll take care of maintenance, repairs, and any tenant concerns. Not ready for late-night plumbing issues or tough renters? Managing a property can turn into a real headache.
2. Opportunity Cost – Could You Use That Equity Elsewhere?
If your home has gained a lot of value, selling it can give you cash for other investments, like:
3. Will It Actually Cash Flow?
Even if you have a low mortgage payment, other expenses can quickly eat into your profits:
It’s crucial to run the numbers to see if the rental income will actually cover expenses and provide a profit.
4. Market Risks and Changing Rent Prices
While rental demand is strong now, market conditions can change. If the economy slows down or more rental properties are available, you might need to lower rent prices to attract tenants. This could affect your expected cash flow.
5. Capital Gains Taxes if You Sell Later
Selling your home now might let you qualify for the primary residence capital gains tax exclusion. This means you can exclude up to $250,000 from taxes, or $500,000 if you are married. If you turn it into a rental and sell it later, you might lose this exemption. Then, you could owe capital gains taxes on your profits. (Always check with your accountant)
Keeping your Idaho home as a rental can make sense if:
Selling your home may be the better option if:
Today’s high real estate prices make buying rental property in Idaho tricky. Holding onto a home you bought years ago can be a smart choice. However, it's important to crunch the numbers. Think about your financial goals and weigh the risks before making a decision!
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