There are many benefits of turning your home into a rental property. Perhaps you’re looking for supplemental income, a tax break, or maybe you want the flexibility of delaying the sale of your home until market conditions improve. Regardless of the reason, you can profitably rent out your home by following these four tips.
1. Establish a Fair Rental Price
As a landlord, it’s important to know what your competitors are charging so you can remain competitive. Asking too much for rent will most likely drive prospective tenants away, while charging too little means you’ll miss out on profits, so it’s a good idea to do some research before you set a price.
So how do you do this? Besides driving all over town and calling up every place with a “For Rent” sign, here are a few resources you can use to get information about rental prices:
- A Multiple Listing Service (MLS), such as Zillow
- Local property management companies
- The newspaper
2. Write a Lease
A signed lease protects all parties involved and makes your rental agreement contractually binding, which is especially important in the event of a lawsuit, say, with an evicted tenant who fails to pay rent.
To write a lease, it might be best to partner with a lawyer to ensure that it complies with all applicable laws in your area. In general, your lease should clearly explain the following:
- Lease terms and conditions (i.e. lease duration)
- Security deposits (if applicable)
- The date rent is due (and how to handle penalties for late payments)
- Rules for handling maintenance and repairs
- A list of all occupants
- A behavior policy
- A pet policy
- Eviction terms
If you plan on selling your home while it’s being rented, make sure you also include arrangements for showings and open houses.
3. Get Rental Property Insurance
“Protecting your property with the appropriate insurance policy is extremely important,” says Bryan Wolfe, USAA’s product manager of rental property insurance. “You need a different policy if you’re renting a property to a tenant versus using it as your primary residence.”
While tenants are responsible for getting renter’s insurance to protect their personal belongings, landlords are covered under “rental property insurance.” This policy may include coverage for the home’s structure, loss of rental income, personal liability, and medical expenses.
4. Hire a Property Management Company
If you need someone to take care of your property on your behalf, you might consider hiring a property management company. This service handles most of your rental management needs such as finding a tenant, collecting rent, charging late fees, handling repairs, and managing vacancies as well as evictions.
While this option may not be feasible for all landlords, it certainly has its benefits.
“Often, the owner will get involved with the tenant emotionally,” says Candice Estey Swanson, former regional president of the National Association of Residential Property Managers. “Even though [property managers] take good care of tenants and they’re sympathetic, their job is to make sure that owners get the rent.”
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