Renting out your home for extra income can be a wise decision in today's housing market. In most major cities, there is currently great demand for rental housing. And if you must move in this current weak sales market because of a job transfer, an expanding family or any other reason, renting out your property -- rather than selling it -- is a great way to generate steady income while biding time for a real estate market recovery. If you have chosen to take the leap and become a landlord, here are a few ways to ensure that the experience is a rewarding one.
Everything in Its Place
The first challenge for would-be landlords is getting the home ready aesthetically to rent. The appearance and overall cleanliness of the home is essential in attracting qualified tenants, and the home needs to be pristine prior to showings. Key areas need special attention. As the foyer is the first part of the home that visitors will encounter, it needs to be especially clean, clutter-free and fresh-smelling.
It is often said that "kitchens and bathrooms sell homes." Well, they also rent them. Make sure these rooms are spotless. Kitchen counters and cabinets need to be clear of clutter, and appliances need to be wiped down with a mild detergent inside and out. In addition, bathroom tile grout needs to be mold and mildew-free. Use bleach and a toothbrush if needed, as nothing turns off a potential tenant more than a moldy tub/shower.
Most tenants expect their new homes to be freshly painted, so put a neutral paint color on all the walls. Remember to put your personal tastes aside. The goal in painting is to appeal to the greatest number of people possible, so it's not the time to take risks or explore your creative side.
Make It Feel Like a Home
Now that everything is neat, clean and fresh, it's important to make prospective tenants feel "at home" in the space. Staged or furnished apartments usually show better than unfurnished ones -- if a few rules are followed. Allow the furniture to define what a space is. People are notoriously bad at envisioning uses for undefined spaces. For example, stage an alcove off the main living space as a dining area or office space rather than leave it open to interpretation.
While basic staging is a huge help in moving a rental property, allowing your personality to be reflected in the home is never a good idea. Be sure to remove family photos, religious artifacts and anything that reveals facets of your personal life.
Insurance and Legalities
Insurance requirements for rental property vary by locality, so make sure you have the appropriate insurance for your area. In any situation where you have people residing in your home, you take on some degree of responsibility for their well-being and safety. Often known as "landlord insurance," these policies can protect you against damage from tenants, as well as from fire and other catastrophes. In addition, most policies will reimburse you for rental income that you lost while repairs were being made in the event of a claim.
In addition, a rental property needs to have proper permits. Unfortunately, there have been many tragic cases where homes have been illegally rented that were full of health and safety hazards, and people have been injured -- or worse -- as a result. While no one likes dealing with the bureaucracy, it's important to have all proper permits in place prior to offering the home for rent.
Establish Policies and Procedures
Who does the tenant contact if a pipe bursts under the sink at 3 a.m.? How is the rent collected? What is the policy in terms of keeping pets? What about roommate shares? All these policies need to be established prior to showing the apartment. In some cases (for example, if you will be living in a city other than the rental home) it may make sense to hire a representative or management company to take care of the property on your behalf and be your "eyes and ears" on the ground. Typically these property management firms charge approximately 10 percent of the monthly rent for their services. It may be well worth the expense.
Figuring out what to charge monthly for rent involves taking a few factors into consideration. The first is, what expenses do you need to recover on the home (property tax, mortgage payments, etc.), and, in turn, how much profit do you wish to make from the rental? Another important factor to consider is how much similar properties are renting for in the area. It would be wise to spend an afternoon playing "prospective renter" and taking a look first-hand at the competition and what those properties are asking for in terms of rent.
Finding a Qualified Tenant
There are a variety of websites devoted to connecting renters and rental properties, but don't forget the value of "word of mouth." Before advertising, be sure to research fair housing laws to ensure that you stay within their guidelines in terms of providing equal opportunity housing. It's important to check applicants' credit to get a sense of their payment history, and all leases should clearly define a specified term of occupancy and should be in writing. Never do business on a handshake, and be sure to collect a security deposit equivalent to at least one month's rent to hedge against potential damage to the property that's inflicted by the tenant. When drafting leases, it may be wise to consult an attorney to make sure you are well-protected.
Is Being a Landlord Right for Me?
While being a landlord has its challenges, for a person with an entrepreneurial spirit and a desire for extra income -- despite the inevitable headaches -- renting out your home can be the solution. It's important to keep a positive attitude and expect the unexpected. Despite the hazards, becoming a landlord has proven to be a positive experience for a number of people. Best of luck on your decision.
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