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The Reluctant But Profitable Landlord Real estate has become a downer for many people, even business owners who own homes. Instead of using real estate to leverage business borrowing options a mortgaged home these days can make it harder to borrow due to negative equity and/or falling prices and soft real estate markets. However, there is one way that you can still take this potential liability and make it something more positive: Rent it out. The Demand for Rentals Increasing In the first half of this year, rentals have increased substantially for last year, 2009. In fact, the volume of rentals has been almost twice in the first half of this year versus all of 2009. The reasons for this are many. Many people are opting out of owning real estate either due to job uncertainty or because of financial hardship. They are getting back into the rental market and that means higher demand. While housing prices are falling, rentals in many areas are either holding their own or rising. As the vacancy rates continue to drop, landlords will be able to use the properties they have to generate cash flow even when they can't sell them. More Cash Flow Means Better Borrowing Terms If you end up renting out your properties to people willing sign rental agreements for several years, you can lock into an easy way to generate cash flow that a bank likes to see on your accounts. Instead of looking at the house you live in as a liability, a rental property is a valid means of generating cash flow that puts you on better terms with borrowers. It also gives you the added advantage of waiting out a sour market until it is a better time to actually sell the property. Price the rental to cover the mortgage plus an additional 10 to 20% to help you cover maintenance costs. If nothing bad happens, you get to rebuild your equity and have a little extra cash to spare. Plus, when you go to the bank for a loan, you can really list it as a positive cash flow asset instead of as a liability. Written by Felix

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