The Top 5 Things to Know Before Renting Your Home
If you’ve considered renting out your home, or if you’re interested in purchasing a rental property, there are some questions you should be asking yourself. Such as, “Is it worth hanging on to this property? How will I feel about strangers moving into my home? Will my tenants be responsible?”
Owning a rental property can require hard work, patience, and planning. The upside to owning a rental property – like the potential to increase your monthly income, appreciation on the home, and building steady cash flow for the future – are all things that rental property owners enjoy. On the other hand, being a landlord may test your ability to deal with the unexpected, like emergency home repairs or unreliable renters.
Before investing in a rental property or turning over your current home to renters, here’s what you can do to make the process a little smoother.
- Research your market. Research the market in the neighborhood of your rental property to choose a rent amount that matches the local rental rates, while still helping you earn a profit. Looking up local rental listings on Craigslist or contacting a property manager to see what the comps are renting for in your property’s neighborhood are great ways to figure out rent rates. Consider the number of bedrooms, bathrooms, square footage and condition of the property. If you’re purchasing a rental property don’t forget to factor in costs like pest control, lawn maintenance, and the occasional home repair.
- Give your home curb appeal. Your rental property isn’t making you any income if it’s not rented. Depending on where you live and the time of year, your home may have taken a beating from the sun, wind, rain, or snow. Before you go out and invest your entire savings or retirement into repairs and curb appeal remember, a power washer can work wonders on your home and give it a fresh look. Clean out the gutters and trim any bushes or low-hanging tree branches. Mow your lawn and give it a good watering and maybe some fertilizer. If the property needs it, throw a coat of paint on the shutters and give the windows a good cleaning. The first impression potential renters get of your property is the same as the first impression on a first date… make it count.
- Make sure your potential tenant can afford the rent. A credit check can offer insights into your potential tenant’s payment history and it gives you a good idea if they’ll likely be a good or bad credit risk. You may also want to hire a company that can perform a tenant screening check to find out if they’ve been evicted from previous rental properties or have a criminal record. Don’t be afraid to ask for referrals from past residences since this information won’t be included in a credit report.
- Plan for unplanned expenses. Rental properties come with their own set of unexpected expenses. These emergencies can range from tenants suddenly breaking the lease and leaving without warning, to calling you on a Sunday night about a leaky water heater. These can be pricey expenses and as a landlord, it’s in your best interest to plan ahead for the unexpected by setting aside a percentage of each months rent for the “just in case” repair or expense.
- Always have ample insurance coverage. When you own a rental property there’s always the possibility that they, or one of their guests, might have an accident or damage your property, and you need to protect yourself and your investment. Insurance is also helpful if your property is in an area that has the potential for natural disasters that could damage your home and create a loss of rental income. Having the proper insurance should cover these things along with legal fees if you end up needing to take your tenant to court.
For some, purchasing a rental property can be all about the school of hard knocks. Rental properties can be a challenge, but if done right, a rental property can help create extra income or lead to a more comfortable retirement. Don’t forget, hiring a property management company to run your investment properties like a business is worth the 8-10% in headaches alone. Just make sure you do your research. The more you know the more you’ll make.