If you’ve ever thought about renting out your home as an income property, you’re not alone. The appeal of passive income is nearly universal. After all, who wouldn’t want to get paid more for less effort? However, renting out your home isn’t a decision you should take lightly. Being a landlord comes with some unique responsibilities — and frustrations. If you’re interested in using your home as an income property, here are three things you should keep in mind.
Know Your Market
Before you consider renting out your home, you need to research your local market so you have an idea of the rental area you’ll be working with. Are you in a high-demand city with a seller’s market? Or are you in a smaller town with less of a need for housing? These will be two of the primary factors in deciding whether or not your home is a viable income property, as well as how hard it might be to find qualified lessees.
Market demand will also directly influence your rental price. As rent payments will be your primary source of income, rental costs must accurately reflect your market. Pricing too far outside of trending averages (in either direction) will harm your ability to secure a qualified tenant. Keep in mind that areas with low levels of real estate demand also have lower returns on investment which could harm your income.
This is a tip that will save both you and your prospective tenants time, effort, and money. Nowadays, so many resources are available to landlords to help them list and rent out their properties. From online real estate platforms to virtual tours, spicing up your rental property with some digital bells and whistles will make your property a more appealing option for the discerning lessee.
Even if you’re not signing up for every online listing site that a Google search brings up, it’s still a good idea to at least offer an online rental application. Not only are these easier to review at your convenience (seriously, nobody needs a file cabinet stuffed with paper applications), they also frequently come with perks. Online applications often streamline the background check and credit reporting portions and aggregate all the data in one tidy package. Plus, it’s much easier on a prospective tenant to fill out an online form instead of driving back and forth across town to drop off a physical application.
Writing the Lease
This will often be the most time-consuming aspect of the rental process. Drafting a lease takes time, patience, and a willingness to revise, but it gives you much more legal protection than any form of spoken agreement. It also affords greater protections to your tenants and shows that you’re serious about your role as a landlord and property manager.
Key aspects of every lease should include a fixed monthly rate, terms of the security deposit, due dates, how late fees are assessed, and who is responsible for repairs. You’ll also include your pet and smoking policies in the lease as well. While online templates are useful, they might not adhere to local laws and regulations. If you’re unsure of the legality of your lease, you may want to seek legal counsel.
Rent It Out
Renting out your home may seem overwhelming at first but that’s to be expected. It’s often a complicated process with a steep learning curve. But if you’re patient and willing to put in the work to educate yourself, you’re that much more likely to find a qualified tenant and establish an excellent rental relationship. With these tips in mind, you’ll have your property rented out in no time at all!