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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.
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.
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.
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.
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.
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!