To rent your home is an excellent way to make a big passive income yearly. In short, it’s one of the best investment opportunities you’d come across.
Notably, it isn’t always challenging to get tenants. After all, people relocate very often. And if your home is located in a hot spot, your rental home will hardly ever be vacant, and the rent will be considerable.
But property rental is in no way a simple business. There are Is you must dot and Ts you much cross to make your rental experience a satisfactory one.
To put you on the right track, here are things you must understand and do before putting you rent your home.
1. Determine how much rent to charge
It wouldn’t be wise to find a tenant before knowing what to charge them. Also, it would help if you didn’t fix a price based on your perception of what’s ideal. Get an idea of what is charged for similar structures within your geographical area. Ask friends how much they pay for rent, check online sources and newspapers, and do your math.
If you don’t want to scare off tenants, your rent should be comparable to what’s in the market for similar structures. It shouldn’t be far less to avoid cheating yourself or causing prospects to think there’s something wrong with the building.
2. Know that your homeowner’s insurance will change its status
Your homeowner’s insurance will become a renters ‘ policy if you’re renting a home rather than living in it. Since you wouldn’t be the one occupying the home, it’s advisable to ask your tenants to get rental insurance.
3. Check if your mortgage is current
Some mortgages have policies surrounding rentals. For instance, an FHA loan demands that you live in the property for at least a year before you can rent it out. It’s advisable to be clear with your lender about how you intend to use the property. And very importantly, your mortgage has to be current before you can put the home out for rental.
4. Have cash reserved for expenses
You may not find a tenant as soon as you hope, or a new tenant causes damage. In either case, you may have to spend a great deal on repairs and maintenance. Ensure you have enough savings to cover such unexpected expenses.
5. Spell out ground rules
It’s crucial to write out the lease terms so that tenants know their rights, obligations, and penalties. A good lease must comply with the county’s fair housing, rental, tenant, and insurance laws. Since the laws vary across locations, it’s important to determine what yours are.
Notably, your lease should include the following:
- Lease term — while month-to-month leases offer more flexibility, an annual lease is best if you don’t intend to sell the property anytime soon.
- First deposit, which may be 6 month’s rent or more
- Pet regulations
- The due date for rental payment
- Penalties for late payment
- Limit to how many tenants there can be in the apartment
- Who’s responsible for specific kinds of repairs and maintenance
- Situations that may warrant an eviction
Your written lease terms will save you if your tenant ends up becoming a pain in the neck.
6. Prepare your home for rent
Preparing your home for rent is virtually the same as preparing it for sale. You want it to be in its best possible condition to attract valuable tenants.
Here’s a checklist to tick while preparing a home for rental:
- Paint the walls to create a fresh, new appeal
- Clean the windows, toilet, and bathroom thoroughly
- Fix broken plumbing
- Declutter and remove personal valuables
- Get rid of pests. Even though they’ll come later, it’s best if they are absent when the tenant moves in.
7. Be wary of problem tenants
You may be lucky to have a tenant that cares for your property as if it’s theirs, and you’d have almost no maintenance issues for years. At the same time, some tenants bring you more debts than peace.
But how do you differentiate between a tenant who will damage your property and a responsible one?
If you’re managing your property yourself, do a background check by requesting the following from your tenants:
- Their rental history
- References (three or more is preferred)
- Credit score
8. Consider hiring a property manager
Return on investment is impressive, but property rental is no easy job. A property management company can handle the hard part, including finding a tenant, receiving rentals, interacting with tenants, enforcing rules, and executing repairs and maintenance.
Most landlords that manage their property themselves often complain of the tenant emergency calls on every little thing, and some tenants even drop by if the landlord lives close. This can be tiring for landlords, so set boundaries if you intend to go solo.
Typically, your state will demand that you live within a certain distance from your rental home if you have no property manager. If you’re not ready for all of that, you need to get one.
Why selling your home may be a better option
Renting a property is no easy task. Since the home is still practically yours, you may be fully or partly responsible for its care and anything that has to do with it.
Some people don’t find the work very appealing, and they prefer to sell the home instead.
Selling your home will be the best choice if you need a large sum at once without worrying about the property for years to come. If you’re asking, “Should I sell or rent my home?” it’s best to speak with a professional. A real estate agent can help you evaluate your situation, goals, and risks to determine what option offers you the best long-term benefits.
Putting your home up for sale is a great way to make passive income. But if you don’t put certain measures in place, you may run into more troubles than you bargained for.
Whether you choose to sell or rent your home, consulting with a real estate professional can help you get the most out of it.