In our current economy many people are anxiously anticipating the sale of their home, and some are deciding that renting their home could be their best option. Obviously this is a great way to increase your current income or help with the daunting task of paying two mortgages. While this seems like a logical move, it is very important to understand the responsibility that comes with being a landlord.
There are many benefits to renting your home but there are also risks that are involved in the process, and you should be aware of all that can happen before going through with renting your property. First and foremost, know that you’ll need to be accessible when your tenant calls with issues involving repairs. You’ll also need to make sure you collect rent in timely manner and enforce the proper leasing terms to your tenant. Keep in mind that apart from maintaining this rental business, you as a landlord are also required by law to provide a safe home to your tenants and you’ll need to ensure that every part of the property is functioning correctly.
Consider also the financial side of the business. Calculate the total cost of maintaining the place, including your mortgage payments, utilities, maintenance, repairs and professional services such as taxes or property management. Properly estimate your rent price and be sure to make it competitive so you won’t have difficulty attracting tenants.
Finding the right tenant is half the battle; one of the most challenging tasks that you should consider is the screening potential renters. Try not to let any personal relationships cloud your judgment when selecting a tenant, whether it is someone you know or not. Make sure to gain full access of the applicant’s full identity, rental history and credit history. Be sure to verify all the personal and professional references they provide and other vital information to confirm that they would be a trustworthy tenant.
Even if you know the person who is renting, get a contract. For both your own and your tenant’s legal protection, make sure you sign a lease agreement and thoroughly explain the terms on the contract. Whether it’s a family member, friend, acquaintance or stranger, it is essential that you do not rely on a promise or a handshake when it comes to renting your property.
Also, make sure to keep written documentation of all interactions with your tenant. Keep copies of all rent checks and all correspondence, taking note of any conversations regarding the home, when you came for repairs or anything else you’ve done to help your tenant.
Once you’ve found the best-suited tenant, think about having them share some of the responsibilities. If you have a small yard, require the tenant to take care of lawn and snow removal. Provide tenants with supplies and appliances that they will need to take care of such tasks, including a lawn mower, rake or shovel, and offer to assist whenever possible. It may also be in your favor to collect utilities in advance. Often utilities will be in your name and difficult to recoup from tenants, especially after they are no longer renting your house. Determining the average cost of utilities used and including that amount in the rent would be your best bet.
If you are the one handling the maintenance of the home and you’re not a handy person, establish a good relationship with an electrician, carpenter and plumber whom you can trust and call to do repairs even at short notice. These people will be of great help to you during unexpected times. Additionally, keeping your property in good shape will be much appreciated by your tenants as they can see that you’re investing their rental payments well and this will lead to a successful business relationship.
Other notable tips: Make sure your insurance covers your house as a rental. Some policies may charge extra if you are renting your house but if you don’t let the insurance company know, you may not be covered. Check with your city or town on regulations, as often times different cities have rules on what rooms in a house may be used for renting or the number of non family members that may live together. Also, don’t forget about the tax advantages, as any tools, supplies and services you purchase for the house can be a tax deduction.
Renting your home to a tenant during an economic slowdown can be advantageous for all involved parties, as long as you take the time and effort to avoid potential hurdles down the road. No matter who resides in the home, it is still your property and it is best to take all precautions to keep it in the best shape possible.