Your best bet is to consult your tax person and they can really put it in black in white to help you figure out how this will affect you.
Rose Nied, Alain Pinel Realtors, 510 530 7011
Jeff Woo, Esq.
Sedgwick, Detert, Moran & Arnold LLP
Complex Rental Property Group
There are several things you can do to get to your answer:
1. Consult your tax advisor and determine what impact this will have on your bottom line. This advice is worth the cost of a consultation.
2. Consult the CC&R's to see what the restrictions you may have for renting out your property.
3. Consult a property management firm to see what rent you can get on your place as well as the cost to have it managed. (You may not want to manage it if you are moving out of the area, have no interest in taking this on, or are in a rent control city.)
Best of luck,
1. Wil you indefinitely rent out your flat? If you don't live in it for 2 out of the last five years before you buy or sell another residence, then your flat may be considered as investment property and not as your primary residence
2. As such, should you try to sell if later, you may be subject to other taxes (if the property appreciated considerably, there are capital gains to contend with). HOWEVER, you may be able to defer those taxes if you buy a replacement property under the 1031 Exchange guidelines, Here's a good link to check out http://www.1031.org/about1031/faq.htm
3. If you generate enough income (declared net income less expenses of maintaining/managing the property) that warrants your keeping the property as a rental, this may be your stepping stone to investing more in the future
4. Or...at some point in time, you decide that you'd like to be a homeowner again, you can also go back and live in the property again. (Then after living in it for 2 out of 5 years, you can think of selling and getting another home).
There's a really good and easy-to-read book that you may want to get: David Bach's The Authomatic Millionaire Homeowner http://www.finishrich.com/books/automaticHO_brandhome.php
Confer with CPA, when you own any property you receive annual tax benefits, property increases in value, tenant pays cover all your expenses, plus more based on current market value.
Many pro's and con's of owning properties
National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911
Rental income would be reported as ordinary income on your tax returns. However, that income will be adjusted by expenses relating to maintaining the property, such as repairs, painting, and (something that is not currently tax deductible) homeowners association fees. You would also get depreciation (something that you don't currently get) on the home, which helps defray the cost of the property even more. The interest expense paid on the mortgage, which is currently reported as a Schedule A expense and is limited or reduced by your own AGI would become a dollar-for-dollar reduction against your rental income.
As Eric has already noted below only your tax or financial professional can give you advice on your personal financial situation, however, there are benefits to owning rental property and the rental income would be offset by expenses and would not be considered, in its entirety, supplemental income. Good luck!!
Grace Morioka, SRES, e-Pro (and Ex-Accountant)
Area Pro Realty
San Jose, CA