Image via Unsplash

Selling a home so that you can move up to a bigger, better home may be the most traditional way of doing things. But it’s not the only way. While there’s certainly nothing wrong with selling, renting out your current home is worth considering. Not only can it allow you to move onto the next chapter of your life more quickly, but it can also set the stage for consistent passive income.

Is it easy? Not necessarily. And you definitely want to think carefully before you decide whether to sell or rent. But if you learn the risks and costs, and you plan and prepare accordingly, then you can supplement your income and open doors to the exciting world of real estate investment.

Here are some tips from real estate advisor Gloria Benaroch to help guide you through the process.

Handle Essential Repairs

Even if you’ll be offering your property at a competitive rental rate, you can’t put your home on the market when it has unaddressed problems. You should plan on making any essential fixes to prepare your property for the first tenant.

For instance, if the roof is in poor condition, it needs to be repaired or replaced. If the foundation is crumbling, it needs to be fixed. Any structural, plumbing or electrical issues must be remedied to make the home safe. And you’ll also want to make any minor repairs such as patching drywall holes, fixing broken steps, or throwing a fresh coat of paint over a bad paint job.

Learn What Tenants Want

If you want to attract good tenants, you need to know what they are looking for. One effective way of doing that is to research the rental market in your area. Look at what appliances, amenities, and features other properties are offering. This will also help to identify any needs for repairs that were previously undetected.

You can also foster a more positive relationship with tenants by working to keep the property looking nice. For instance, if you don’t want tenants to keep repainting, you could allow them to add wallpaper instead. You could even look into some wallpaper that’s customizable, for a little added style.

Focus on Good Tenants

Being a landlord often means that you have to deal with bad tenants. But if you take precautions beforehand, you can reduce your risks of getting a bad tenant. For instance, if you list your property on sites like Rentals.com, you can narrow potential tenants by budget, home layout, pet friendliness, and many other factors.

It’s also critical to have a thorough tenant screening process established before you put your property on the market. Along with running each potential tenant’s credit, make sure they have stable employment, and reach out to past landlords. And don’t forget to request a security deposit and have the property inspected before your first tenant moves in.

Figure Out How to Manage the Property

Successfully converting your primary home into a rental property doesn’t end after you get the home ready and find good tenants. Managing the property once you rent it out requires a lot of time and effort. Determine from the beginning how you will handle this process.

If this is your only property, you may be able to manage it yourself as long as you have DIY skills and spare time. But a lot of landlords find working with professional property managers to be well worth the investment. Along with handling any necessary repairs and maintenance issues, a property manager will ensure the home is cleaned between tenants, that rent is collected each month, and many other aspects.

If you decide to branch out, you may want to start your own LLC, or Limited Liability Company, which has certain tax benefits and legal protections. The process is a bit technical; luckily, working with a formation agency makes the process fairly quick and affordable.

Determine the Rental Rate

Lastly, take the time to carefully consider what price you will rent out your property for. To determine the rental rate, you’ll need to research comparable properties in your area.

Consider the size, layout, and features of each property, as well as the price range. Then, estimate how much it will cost to own the property, including the mortgage, taxes, insurance, and other expenses. The key is to price your property competitively while also ensuring you make a profit.

Turning your home into a rental property can be the perfect introduction to real estate investment. Consider the tips above as you prepare your property for tenants, be selective with the tenants you consider, determine what you will do about property management, and set a competitive and profitable rental rate. Finally, keep researching what it takes to be a successful real estate investor so that you can build a firm foundation for your financial future.

Gloria Benaroch understands that your home purchase will probably be the single most important investment of your life — and she treats it as such. Her knowledge of the area combined with ethical business practices and a commitment to detail mean that her clients go to the closing table with no surprises. For more information, please visit her website or contact her today!

1. Title Insurance

In New Jersey, the home buyer pays for the owner’s and lender’s policy, however.

There two types of title insurance policies in New Jersey, each of which are paid at the time of closing, usually by the buyer of the home include:

Owner’s Title Insurance – protects the buyer by ensuring the buyer has a marketable title or free and clear.
Lenders Title Insurance – ensures the lender has a 1st line position on the property in case of default.

Prior to the transfer of any property, a title agent (or attorney) will have a title search conducted to ensure no outstanding encumbrances or liens exist.
Abstract Title examinations generally cost around $1500-$1700 in New Jersey.

Title Insurance Policies can Protect Buyers From Things Such as:

Liens

Unpaid mortgages

Missing heirs who may lay claim

Unpaid property taxes

And more…

2. Real Estate Transfer Tax – RTF

The New Jersey Real Estate Transfer tax is a tax that is levied against any transfer of real estate property to offset the costs of tracking real estate transactions.
The state’s current rate of transfer tax is calculated at 1% of the total sale price of the home. 

The payment is a prerequisite for recording the deed. The RTF is usually collected at the real estate closing by the legal representatives or title insurance agents responsible for recording the deed at the county registry offices. Funds from the RTF are then shared between the state and counties. The state portion of the revenue is allocated to neighborhood revitalization, shore protection, and the state’s general fund.
In NJ, those sellers who are 62 years or older at the time of closing, or are a disabled veteran get a little bit of a break, with a reduction in fees to 0.5% of the total sales price.

3. Costs Associated with Remedying Title or Survey Issues

In the event that issues surrounding the title or survey emerge, contacting a local real estate attorney is the advised route to obtain counsel on your options and cost of resolution.

4. Local Government / Municipal Costs – 
Certificate of Occupancy

There are localized costs associated with the sale of a New Jersey house. These may include local stamp taxes, recording fees, community association estoppel fee, or other fees imposed by the county, city or town such as those for utilities or local taxes. For example, many NJ townships require that you legally verify you are, in fact, the owner prior to sale.
This process involves obtaining a “Township Certificate of Occupancy”. In some towns it only involves a smoke certification and in other towns in addition they have a list of items that the building inspector will look at. The town will also make sure that there are not any open permits. Costs can be around $100 or more depending.

5. Deed Preparation by Attorney or Title Company

The cost of deed preparation is paid for by the buyer’s attorney and generally ranges between $100-$150.

6. Seller Attorney Fees

In the state of New Jersey it is not required that a licensed attorney be at the closing. It is in your best interests to hire an attorney that you trust to handle escrow and closing matters. Having a lawyer in your corner is never a bad idea for contract review or to assist in negotiations of the home inspection for example. Real estate attorneys may also be useful for assisting with unconventional circumstances such as with a lease-to-own or owner-financed deal, and with any issues that might arise with contract disputes or title issues.  Some attorneys offer a  “flat fee” real estate closing services $950 to $1500; others charge by the hour depending on the transaction.

7. Real Estate Agent Commission

While there are other ways to sell your home rather than going with the traditional real estate agent listing, when you hire an agent they are paid based on a commission rate negotiated with you against the sale price of your home. 

Real Estate commissions in New Jersey are defined as a percentage of the sale price of a home, or can be a flat fee, or can be variable, they are ALL negotiable.

8. Home Warranty Fees

Some New Jersey home sellers opt to offer a home warranty to cover components or systems of a house that may pose a risk of failure for the buyer. While optional, offering a home warranty is a way to sweeten the deal, attract more buyers and remain competitive during months when the real estate market heats up. There are 2 types of warranties. One that inspection and one that does not need an inspection prior to giving a warranty.There are some advantages to the seller when offering a home warranty. They are also protected for the term of the listing in the same way as the buyer.  One-year home warranties in New Jersey cost between $350-$850 depending on what is included.

SOLD! Bee Home! Bee Happy!

closing process