Now that you’ve decided to move, you might think the best option is to sell your current residence. However, you might not be able to sell it quickly at the price that you want.
The positive news is selling your home is not the only option for you. You can opt to convert it into a rental property.
Many homeowners have already experienced the benefits of converting their home into a rental. Below are just some of the benefits of having a rental property:
Earn Passive Income
One of the main reasons people invest in rental properties is the passive income they can earn. You can use the added income to pay off your home’s mortgage. Conversely, you can use it for home renovation and maintenance expenses.
Enjoy Property Appreciation
If you’re able to maintain ownership of your home, its value will appreciate over time. That’s why when you sell it in the future, you’ll be able to get a higher return on your home.
Qualify for Tax Deductions
Having a rental property will qualify you to get tax deductions for certain expenses. Some of these expenses include mortgage interest, property taxes and landlord insurance.
Additionally, these include homeowner association fees, as well as home maintenance and repairs. Thus, you will be able to save money from these tax deductions.
If you’re considering converting your home into a rental property and becoming a property manager, you can follow these steps:
1.Wait If Your House Is On Mortgage
If your house is on a mortgage, you need to wait for at least a year before renting it out. The reason for this is you can get a lower interest rate and down payment when you buy a home. However, if you buy a rental property, you’re not eligible to get the same benefits.
Take time to read your loan agreement or talk to your lender to clarify this rule. After you’ve lived in your home for the required number of years, you can then rent it out.
2. Check If You Can Get Another Mortgage
To purchase and move into a new home, you might need to get another mortgage. If you need to apply for one, find out if you qualify first before renting out your current home.
Set a meeting with your lender as soon as you can. Your lender might even consider the rental income you will get from your rental property.
3. Have Your Property Thoroughly Inspected
Before you start advertising your rental property, it’s important to have it thoroughly inspected. This is because you need to make sure your property is safe and habitable for your tenant.
Your home inspector will inform you if you need to fix the plumbing or get rid of pests. You might, instead, need to repair the flooring or the structure of your home.
Make sure you repair air filters, light fixtures and ceiling fans. If there are any cracks or holes in the walls, you need to fill them in.
If possible, have your property assessed by the local city government’s inspector. The inspector will inform you of what problems you need to address before you can rent out your home.
4. Ready Your Property
To ready your property, you need to change locks and alarms, as well as install carbon monoxide detectors. Make sure your property is in top condition to be able to attract potential tenants.
Here are some ideas to revamp your property:
- Mow the lawn, add flowers and trim unruly trees.
- Have the whole property professionally cleaned.
- Repaint your property or change the wallpapers.
- Buy new carpets, or have them cleaned.
- Buy new appliances if your house is furnished.
- Remodel your kitchen or bathroom to make it look new.
5. Know the Law
It also includes the tenant’s right to withhold rent if the repairs are incomplete. Find out the different property taxes for rental properties and what the occupancy limit is as well.
6. Set the Rental Rate
Another significant step is to find out how much you want to charge for your rental property. To be able to set the right rental rate, you can do some market research. Take time to research the current rental rates for similar properties in your area.
As a general rule, landlords can charge 0.8%-1.0% of a home’s value in rent. Additionally, consider the costs that you will incur when you rent out your property. You can also consult with an experienced real estate agent to know the reasonable rates for your property.
7. Create a Tenant Application Form
Prepare a standard form that potential tenants can fill out. This form should include their contact information, employment history and list of references.
Some landlords even include an application fee to cover for the costs of the background check. Having a tenant application form will help you screen your tenants and find the right one.
8. Find a Tenant
After completing the previous steps, it’s time to find a tenant. You can create an online property listing and include professional photos of your property. It’s crucial to screen potential tenants by doing a background and credit check.
Your ideal tenant is someone who has been employed for at least a year and can provide solid references. Even though it is challenging and time-consuming to find a tenant, it’s all worth it. Finding a good and reliable tenant will save you from future problems, such as missed payments and damaged property.
Converting your home into a rental is a good option if you don’t want to sell your property. As we’ve shared in this article, the benefits of having rental property are numerous.
Following the steps above will help you convert your home into a rental in due time. With the right preparation, knowledge and foresight, you can become a successful landlord.
Contact RE/MAX Infinity Property Management for any inquiries concerning this post or other property management questions.