If your place is too small for your growing family, you’re probably thinking of buying a bigger house for your kids’ future. But what are you going to do to your property?
In most cases, you might be thinking of selling it and accepting whatever the market has to offer. However, there’s another option you might want to explore, and that’s to put your home up for rent.
Having your property rented out is a good option if you think it’s not possible to reach the breakeven point by selling it on the market. Also, you may consider this option if the property is a special gift or inheritance and you can’t afford to lose it. Or you might be one of the owners who want to amplify your income.
On the other hand, renting out a home won’t be as easy as it seems. You have to consider a lot of factors, including the value of the property. With that, you might want to look at this site to understand how to properly set a rental fee for your property.
Continue reading to learn the basic steps to turning your residential property into a rental property.
Determine If You Want To Be A Landlord
Before you decide to rent out your property, you need to understand that being a landlord isn’t an easy task. There are plenty of responsibilities you have to shoulder, such as dealing with maintenance issues and being on call.
Also, you have to learn how to deal with lousy occupants that don’t take care of your home. Not just that, but you also have to prepare yourself to collect payments, particularly overdue payments.
Renting out properties is an excellent source of income to supply your family’s needs. However, it can also be a cause of financial problems. It could be because of unexpected maintenance issues that need to be resolved immediately or damage caused by tenants.
Before you proceed to the next steps ahead, make sure that you’re prepared to handle a lot of challenges, such as those above. Also, if your expected return on investment (ROI) is the same as the market value, then your property may not be ideal for leasing.
Update Your Policies
When renting out a property, you want to make sure that it’s properly insured to protect yourself from possible liabilities in the long run. However, it depends on your insurance plan. So, make sure to ask your insurance provider about the additions and deductions regarding your policy, especially when making a claim.
Landlord insurance is more expensive than your typical insurance policy because renting out a property is more vulnerable to maintenance issues. Basic landlord insurance can protect you by covering property damage and offering protection to certain areas, such as pools, sheds, and other outdoor facilities. It also covers maintenance issues concerning your tools and equipment.
In addition, landlord insurance can offer legal assistance in the event of a lawsuit filed against you and your property. It also covers loss of rent due to circumstances that make the property unlivable, such as violent storms and flash floods. Significantly, make sure that claiming insurance won’t be as challenging as pulling out your nails.
Implement LLC Or Umbrella Policy For Extra Protection
Since leasing out a property is supposed to be an income source, you want to ensure that future tenants won’t be able to besiege your family and your other assets. That being said, it would be best to protect yourself by purchasing an umbrella policy or establishing a limited liability corporation or LLC.
Renting out a property opens the door to possible liabilities, and having an umbrella policy can protect you from shouldering them. For example, someone you rejected can file a case regarding discrimination against you, or a tenant may fall across your stairs and demand medical assistance for possible expenses.
If you’re only renting out a single property, which is your home, having one protection is enough. However, some states will require you to create both of them for maximum protection. With that, you might want to talk to your real estate attorney regarding such statutory laws before making a decision.
Set Property Rules
If you want to be a flexible and kind landlord, there’s a high chance that the road will be rough for you. That’s why it’s important to set clear and well-defined rules that establish a system between you and your tenants.
Tenants will take advantage of your kindness, which could lead to tons of payments being overdue. Not just that, they can also do it again next time, thinking that your decision will still be the same.
However, such rules may lead to discrimination lawsuits or occupants with many requests for exemptions. To help you decide, here are some factors you might want to consider and include:
Number Of Occupants
It would be best to limit the number of people who are allowed to occupy the property. You can do this based on the number of bedrooms inside the house. For example, a three-bedroom home would be good for six people or less.
Pets
If you don’t want animals inside your property, you can talk to tenants about it, especially if you’re willing to permit certain breeds.
Maintaining The Landscape
Be clear with your tenants about who’s responsible for maintaining your yard. In most cases, tenants should keep the yard clean.
These are just some of the factors that will help you create a fair rule and policy guide for your tenants. You may also take into account other factors, such as cleanliness and proper access to the property.
Establish An Application Form
When you’re looking for tenants, you’ll need something that will help you get to know them better. You might want to create an application form that they can fill out that includes their name, contact details, social security number, and employment information for references.
On top of that, you can charge an application fee to fund your background checking procedures. In addition, you need to ensure that the application form will cover everything you need to know. Lastly, make sure that you won’t be asking them about discriminatory topics, such as religion and race.
If this is a tedious task for you, you should consider hiring a property manager who can manage such matters.
Final Words
Renting out properties is an ideal option if you want to have a passive income and if you want to retain ownership of your property. However, renting out your home won’t be as easy as it seems. There are challenges you might face along the way, so make sure that you’re prepared enough to take them on.
If you’re sure to rent out your property, you might want to consider the essential steps and measures presented above to protect yourself from unwanted expenses and crappy tenants.
You might need to update your insurance policies, acquire additional protections like LLC and umbrella policies, set balanced and universal rules, and establish an application form.
