Preparing a house for rental
Homeowners often look to sell their property when they move, but some will consider renting it out to be the preferable option. Perhaps the residence is languishing on the market and the income is necessary to make the mortgage payments. Or maybe you're staying in the region and are interested in keeping the home as an investment property.
Renting a home has the potential to defray costs or even turn the property into a source of income. You'll want to start by taking the necessary steps to ensure that you won't regret the decision to take on tenants.
Before you rent
One of the first things you should do is consider whether you are capable of being a landlord. Brigitte Yuille, writing for the financial site Investopedia, says you'll take on quite a few responsibilities if you manage a rental property. You'll have to make sure your tenant stays current with rent payments, be on call to address any problems, and market the property if it becomes vacant.
You can hope to attract good tenants, but you'll have to be prepared for unpleasant situations. Consider how you'll resolve any disputes with tenants. These problems can range from feuding with a neighbor to a tenant who is late with payments or misses them altogether.
If you don't have the time or inclination to take on the responsibilities of being a landlord, you can hire a property management company. This entity will handle repairs, evictions, and many other aspects of renting a home. Patricia-Anne Tom, writing for the National Association of Realtors, says you should make sure the company is reputable and be aware that they will collect a certain percentage of the monthly rent for their services.
Though renting can bring in a steady stream of income, you'll also have to consider whether your finances will prepare you for unexpected costs related to a rental property. These expenses include regular and emergency repairs, damage that exceeds your tenant's security deposit, and periods where you are responsible for any financing costs because no one is renting the home.
Once you decide that renting is feasible, you'll want to modify your insurance coverage. You should change your policy from homeowner's insurance to a landlord property insurance policy. Yuille says this switch will cover certain damages not included in a homeowner's insurance policy, such as vandalism by a tenant. You'll also want to explore liability insurance to protect you in the event of a lawsuit from a tenant.
If you have a mortgage, you'll need to inform a lender about your decision to rent the home. Tom says that since the lender has a financial interest in the home, they may require you to meet certain conditions to continue holding a mortgage as a landlord.
Sprucing the place up
Before you advertise your home as a rental, you'll want to make sure it's in good condition. A home inspector or contractor will be able to look over features such as the roof, plumbing, electrical system, floors, and heating and let you know about any problems.
Fixing these issues will require an up-front cost, but it will also make the property more attractive to tenants. The inspection can also alert you to all pre-existing problems at the property so that you will be better able to identify any damage that appears during a tenant's stay.
Make sure you have a few basic safety features in place. The exterior doors and windows should lock securely. There should also be functioning smoke detectors in every bedroom, as well as at least one smoke detector and fire extinguisher on each floor.
A clean property will also increase a residence's appeal to renters. Sweep the floors, add a new coat of paint to the walls, give the carpets a thorough cleaning, and clean up any other areas that need it.
Determine which items you'd like to keep in the home. A property may hold greater appeal to a tenant if it is furnished or has a washer and dryer. However, you should remove any valuable furniture or items to eliminate the risk that they will be damaged or stolen.
Yuille suggests making a list of the most attractive amenities of the property. Use these features to draft a listing to be used in advertising the home. Tenants are most likely to be searching for a rental between March and August, but you'll likely get some interest no matter what time of the year it is.
In setting a price for the rent, charge enough to defray your costs but also keep the monthly payments low enough to be appealing. Consider the market value of your home as well as what other people in the neighborhood are charging for home rentals. Consider whether you can cover any utilities as an added incentive to renters.
Screen any applicants who are interested in the property. Tom recommends getting references and running a check on their credit and criminal histories. Once you are satisfied with a tenant, draw up an agreement stipulating what is due at the start of the rent and how much is owed every month.
Finally, be aware of any tax issues related to the rental. You can claim some deductions as a landlord, including expenses related to maintaining the property. However, there are also limits to how much you can claim, and you'll also have to note any rent payments as income.
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