How to Turn Your Home into a Rental Property
Being a landlord or turning your home into a rental property is a great way to earn extra income, especially long-term. This is a smart investment move, but there are many things you need to do before to ensure that you earn enough from your property as a landlord and avoid trouble. So, are you thinking about turning your home into a rental property? Here is a checklist of the important things you first need to do.
- Check for damages and make repairs
The first thing you want to do is ensure that your property is in perfect condition to rent. That means checking for damages in and out of the house and making necessary repairs. Inspect the roofing, plumbing work, toilets, and faucets to detect leakages and signs of water damage. You should check your staircase to ensure the handrails are safe and sturdy. Also, check and where needed, install new key clamp fittings.
After making the necessary repairs, consider upgrading outdated designs, appliances, equipment, finishings, etc. For instance, you could add LeafFilter to your roof to improve and protect the gutters, for example. Ensure your rental property meets basic safety and security standards to protect tenants and boost appeal. Install functioning smoke and carbon monoxide detectors, secure locks on doors and windows, and adequate outdoor lighting. For added protection, consider security cameras or alarm systems. Regularly inspect stairways, handrails, and other hazards to ensure safety and compliance with local codes. These upgrades enhance tenant trust and make your property more attractive to renters.
- Get the necessary permits
Once your property is in excellent condition, the next step is securing the necessary permits to legally rent it out. Permit requirements vary depending on your location, but you may need a rental license, certificate of occupancy, or zoning permit. These documents ensure your property complies with local housing and safety regulations. Contact your local municipality to determine exactly which permits are required for your area. Additionally, inquire about any tenant limits, inspection requirements, or other restrictions that might apply to your property to avoid potential legal issues. Taking these steps helps ensure a smooth and compliant rental process.
- Property rent charges
Next, decide how much you can or should charge for rent. Typically, landlords charge between 0.8% and 1.1% of their home’s value as rent. As a landlord, you cannot set rental prices arbitrarily. Determining the right rent for your property involves several key factors. Location plays a significant role, as rental rates in your area will influence what tenants are willing to pay. Comparing your property to others on platforms like Trulia or Craigslist can provide valuable insights. Property value is another consideration; for homes worth more than $375,000, you might charge less than the standard 1% rule to attract tenants. Seasonality can also impact rental prices, with demand fluctuating depending on the time of year.
Additionally, you’ll need to account for expenses like repairs and maintenance, which may cost around 1% of your property’s value annually, or roughly 50% of rental income. If utilities such as gas, water, and electricity are included in rent, estimate these costs carefully. Other costs, including taxes, HOA fees, and insurance, should also factor into your pricing. Using accounting software or spreadsheets can help you manage and plan for these expenses. Regularly reviewing and adjusting your rent to reflect market trends will ensure your property remains competitive and profitable.
- Insurance cover
Your rental property is an investment that requires protection from unforeseen circumstances. One of the best ways to protect your property is to get insurance coverage. Your regular homeowner insurance may not suffice, as you’ll have to get landlord insurance. That will protect your investment property from damage or loss caused by insured events and any loss of rental income that results. Take the time to select an insurance provider that offers the best package.
- Outsource or manage the property
Decide whether to manage your rental property yourself or hire a property manager. Managing a single room is usually simple and may not need professional help. Larger properties with multiple tenants often benefit from a property manager. They streamline operations, handle tenant issues, and ensure proper maintenance. This choice can save time and reduce stress, especially if you live far away or have other obligations.
