Whether you’re relocating or simply upgrading to a new place in the neighborhood, there’s a good chance that selling your old home is your go-to plan. While this is a common practice, it isn’t your only option. Renting out your property and becoming a landlord can be a very worthwhile and lucrative choice if the conditions are right. Answer these five questions to determine whether or not this approach may be right for you.
1. Who Will Help Maintain the Property?
Even though you’re no longer living there and you will expect your tenant to keep up with basic cleaning and yard work (if applicable), there are still plenty of things you’ll be responsible for when it comes to maintaining your property. In general, renters aren’t accountable for things that break, wear out, or require upkeep as part of basic home maintenance (as long as it wasn’t a result of negligence, improper use, or intentional damage). This often includes appliances, light fixtures, your HVAC system, plumbing, and so on. Depending on how handy you are and your level of experience, you may be able to address some simpler issues on your own, as long as you’re still local. If you plan to relocate out of the area or just don’t want to deal with the hassle of repairs, hiring a property management company can take this task off your plate.
2. Do You Have the Available Cash to Cover Missed Payments?
In a perfect world, every tenant would be a good one, who pays their rent on time every time. Unfortunately, even those who start out as reliable renters can fall behind on payments. If this occurs, you’re still responsible to maintain those monthly mortgage payments (if you still have one) while also taking care of your personal expenses. In general, you should have at least an extra six months’ worth of rent payments in savings to help cushion you in case a renter stops paying. Most of the time, that’s enough to keep you afloat until they are able to pay or you find a new tenant.
3. How Much Should You Charge for Rent?
There are many factors to consider when it comes to choosing the amount of rent you want to charge for your home. Researching similar properties in your area is the best place to start. This can help you get a feel for what’s reasonable while allowing you to raise or lower your price according to your goals. For example, charging a little less than comparable options can help you find a tenant fast. Whatever you decide, it should absolutely cover your monthly mortgage or tax rate, along with other items, such as HSA fees if they apply. You’ll also need to decide if utilities are included and if you’ll charge other fees, such as pet, parking, and more.
4. Do You Know How To Vet Applicants and Draft a Contract?
While finding a willing applicant might not be tough, it can be hard to know how to vet your applicants and find the best fit for your situation. Plenty of online screening services are available to help you see what you need to know, such as credit scores and criminal history. Keep in mind that you’ll also need to draft up a contract that’s actually legally binding. You’ll want to consider policies on missed payments, security deposits, and more during this process. When in doubt, it’s always best to work with a professional so you can rest assured that your interests and your property are protected.
5. Is Your Home Move-In Ready?
If your home is in serious need of upgrades or repairs, you may need to address them before listing it as available to rent. For some people, a good cleaning and a fresh coat of paint are all that’s needed. However, serious projects may take a little more time and money to make sure it’s safe, ready, and appealing to prospective tenants.
Are you ready to become a landlord? With the right approach, renting out your old home can be a great way to earn some extra money with relative ease. Just be sure to get the professional support you need first.