With a slow housing market and many homeowners finding themselves underwater on their mortgages, now is a great time for people to turn their homes into investment properties by renting. Renting is not as simple as just sticking a sign out in the front yard, however. Here are five steps homeowners should take if they want to start renting out their homes.
Fix Up the Home
Even with the large amounts of people who have recently had their homes foreclosed who are now looking to rent, homes that are in desperate need of repairs or updates are not likely to rent quickly or for top dollar, if they rent at all. Homeowners should go through their homes and fix anything that needs repaired. They should give the entire house a fresh coat of paint and new appliances if needed.
Change the Property Status
Before they start renting, homeowners will need to alert a few different companies. The mortgage lender will need to know, as having a tenant will likely affect the homeowner’s mortgage. The insurance company will need to know, as the homeowner will want additional insurance to cover any problems having a tenant may cause. The homeowner should also alert the local municipality of the home’s change in status as well.
Find the Right Tenant
Having the right tenant can make all the difference when it comes to whether the renting experience is a positive or negative one. Homeowners should advertise in several places, including Craigslist, Facebook, the classifieds and local publications to increase their chances of finding a tenant quickly. Then, they should interview and perform background checks on potential tenants to screen out any tenants who are likely to cause problems for the homeowner down the road. While a foreclosure or bankruptcy may be forgivable, finding out that a tenant has had multiple financial issues or cannot seem to keep a job should raise a red flag.
Charge a Fair Price
Knowing how much to charge for a rental property can be difficult. While homeowners will undoubtedly want to cover their mortgage, the amount the homeowner wants to get really has no effect on what the rental is worth. Homeowners should research similar rentals in the area to see what a fair asking price would be. Homeowners may even want to consult with a local real estate agent. Asking the right price will help homeowners get their homes rented faster.
Require a Lease
No matter who a homeowner rents the house to, they should always have the person sign a lease. The lease should detail all the particulars of the rental agreement including when rent is due, how much rent is and who will make any repairs. It should also spell out the consequences both parties will receive if either of them breaks the lease. While writing out all the particular lease details may not be fun, a lease is absolutely essential for legally protecting both parties.
Renting out a home is a great way for homeowners to make some extra cash and protect themselves from the financially devastating effects of a potential job loss. While not for everyone, homeowners who choose to rent out their homes can enjoy an easy and predictable extra source of income and financial security during tough economic times.
