Thinking about turning your home into a rental property?
If you are having trouble selling your home, you have a number of options. You could stay in the property and hope for the best, but if you have already bought a new home that may not be possible. You could pull your home from the market, but again if you already have a new home that is probably not a smart idea.
The third option is to keep the property and rent it out. Even if you do not relish the idea of becoming a landlord, the rental strategy can be a winning one. The key is to understand exactly what you are getting into and prepare as carefully as you can.
Protecting Your Property
Homeowners planning to turn their houses into rental properties have a number of things to consider. One of the most important considerations is insurance. Even if you already have homeowner's insurance, you may not be fully covered for a rental. When you rent out your home, you take on some responsibility for the safety of the tenants who live there. You will need to secure enough liability coverage to protect you from unforeseen circumstances.
Depending on where you live, you may also need to secure a permit and submit to inspection before you can rent out your home. Check with the municipality where you live and ask about the permit requirements. The good news is that permits are generally not expensive, but you may need to pay for an inspection of your wiring and plumbing and have the home checked for safety hazards.
Do Your Homework
You will also need to evaluate your property to see if it needs any repairs or upgrades. It can be hard to rent a home with only a single bathroom, and some tenants will avoid homes with outdated kitchens or bathrooms. Do your homework and research comparable rental homes before listing your own property.
The good news is that the repairs and upgrades may also help your home sell. The same things that make the property unattractive to renters could be turning off potential buyers as well. Adding a half bath or remodeling the kitchen could improve the resale value of your home, and the rent you receive in the meantime can help you keep up with the mortgage.
Last but not least, you will need to decide if you really want to be a landlord. If you are comfortable making small home repairs (or know someone who can do it for you at a reasonable price), renting the property on your own could be a smart move. If not, it might make sense to hire a property manager to take care of all those details.
Hiring Professionals to help
A property management company can advertise your rental home, help you find a suitable tenant and take care of collecting the rent and performing needed repairs. In exchange, the firm will keep a portion of the rent. If you need to rent your home but do not enjoy the prospect of being a landlord, hiring a property management company can be a smart move.
When you put your home on the market, you hope it will sell quickly and that you will realize close to your asking price. Even so, having a plan B is a good idea. Having a backup plan that includes renting out your home can protect you if the property does not sell right away and give you the cash flow you need to carry the mortgage until it does.
Feel free to contact me for more details on how to tap into your home equity for home improvements.