Selling your home isn’t the only solution you have when faced with a relocation proposition. You can convert it into a rental property instead. This can allow you to hold onto it while waiting for your property to attain the best value for sale.
Converting your home into a rental property can provide you with tons of benefits if you do it well. Among other things, it can provide you with a steady income stream, appreciate in value with time, and allow you to take advantage of numerous tax deductions to minimize your tax obligations.
If you’re still weighing your options, compare the projected returns from renting versus selling your home.
But as with all other things in life, you have to do it well. You have to treat your new gig as a landlord as a business and not a hobby. Luckily for you, this blog has you covered in this regard.
Here are the important basics to know when converting your home into a rental property.
Decide Whether You Can Be a Landlord
To be a successful landlord, you’ll need to possess a certain level of skills and experience. Landlords are bound by certain legal obligations. If you are not well familiarized, you can easily land in difficult legal situations.
For example, the following questions are illegal to ask a potential tenant when they are looking to rent from you.
- Are you pregnant?
- Are you disabled?
- Is that a service animal?
- Are you gay?
- What is your nationality?
These questions and several others violate the Fair Housing Act, as each of these characteristics is a federally protected class.
These laws can be tricky to keep in mind when searching for a tenant. Hiring a property manager is an option many landlords consider to give them peace of mind in this regard. A full-service property management company can help you manage all aspects of your property, including tenant selection, relieving you of stress and freeing your time.
Get Another Mortgage
Unless you’re planning to pay cash for your next home, you’ll need to take out another mortgage. Make sure, however, that you pre-qualify for another mortgage before moving out of your current home.
To get a mortgage prequalification, you’ll need to provide your mortgage agent with certain crucial information, including your income, debt, credit history, and how much you have for the down payment.
Get the Right Insurance Policy
The insurance policy you have in your current home won’t be able to cover your rental property. A homeowner’s insurance policy is only meant to cover a primary residence and not an investment property.
Once you convert your home into a rental property, you’ll need to take a landlord’s insurance policy. The policy is a specialized type of insurance cover that is designed to cover a range of risks unique to rental properties.
A standard landlord insurance policy will generally cover the following risks.
- Property damage – The damage can result from perils such as vandalism, water damage, fire, and smoke. A landlord insurance policy will help cover the costs of repairs or rebuilding, allowing you to continue renting out your property.
- Liability – Landlord insurance provides liability coverage in case tenants, guests, or other third parties get injured while on your property.
- Tenant negligence – Landlord insurance policy can also cover certain types of property damage that arise from a tenant’s negligence or carelessness.
- Loss of rental income – You may lose rental income after your property gets damaged resulting in uninhabitability. In such a case, the landlord insurance cover can help cover the lost rent, minimizing your financial liabilities.
Hire an Inspector
You will need to ensure that your rental property meets the stipulated habitability codes before you start renting it out. Please note that you cannot rent out your property if it has any of the following issues.
- Severe damage to ceilings, walls, or foundations.
- Lack of running water, sewage backups, and leaky pipes.
- Electrical issues like overloaded circuits, faulty wiring, or lack of proper grounding.
- Mold and mildew that arises from excessive moisture.
- Pest infestations of things like rodents and insects.
Fixing these issues will ensure your property is rent-ready and fully abides by the local warranty of habitability.
Improve the Curb Appeal
Once you have taken care of crucial repairs, you can move on to improving the property’s aesthetics. The curb appeal, in particular, can either make or break your efforts of attracting and retaining quality tenants.
The curb appeal is the first thing that prospective tenants will see once they visit your home. If it feels uninspiring, prospective tenants won’t even want to see what’s on the inside.
To improve the curb appeal of your rental property, the following are some of the things you could do.
- Revitalize the look of your property’s exterior with a fresh coat of paint.
- Landscape the yard and plant some colorful flowers.
- Give the home a thorough, professional cleaning.
- Invest in good lighting like accent lighting to highlight architectural features.
Aside from improving the curb appeal, you can also make crucial upgrades and renovations to the inside of the home. For instance, upgrading the kitchen appliances or remodeling the bathroom to uplift their look and feel.
Hire a Property Manager
Ultimately, the success of your rental property lies in how it’s managed. If you don’t possess the requisite skills or experience, a property manager can come in handy. They can help you oversee every responsibility you have as a landlord, from determining the rental rate and marketing the property, to responding to repairs and handling tenants’ complaints.
Conclusion
When relocating, selling your current home wouldn’t be the only option you have up your sleeves. Converting it into a rental property could be a great option. After all, the benefits could be astounding, especially if you get everything right.
McCaw Property Management would be more than happy to walk this journey with you. We have been helping property owners in the Dallas/Fort Worth area achieve peace of mind since 2003. Get in touch today to learn more!