Thinking About Renting Your Home for Income? Here’s What You Should Know First
Did you know about 66% of Americans own their homes? That means that the other 33% are renters–100 million renters, to be exact.
What does this mean for you, a savvy homeowner? If you’re thinking of renting your home, there’s a huge pool of potential renters out there.
More and more people are choosing to rent instead of buy, which means now could be the perfect time to rent out your house.
But before you take that plunge, there are some important factors to consider. The welfare of your property–and your bank account–depend on it.
In this post, we’ll discuss the pros and cons of renting out your house so you can make the best possible decision. Read on to learn more!
Is Renting Your Home the Right Choice for You?
For starters, what’s got you thinking about renting your home?
If you’re hoping to make a lot of money, beware. While it’s the goal of every landlord to turn a profit, renting a house is not a get-rich-quick scheme.
Does this mean renting your home is a bad idea? Not at all! It could be the perfect solution if:
- You’ve tried to sell but the market is slow.
- You owe more than the home is worth but it won’t sell.
- You’ve taken temporary work in another area.
- You’re interested in entering the world of property management.
Let’s say a relocation management company has set you up in a neighboring state for a short-term work contract. Or maybe you inherited your parents’ home and you don’t want to sell it–but you don’t want to live in it, either.
Any of these scenarios could equal the perfect opportunity to rent out the home.
Long-Term or Short-Term Rent?
If renting seems like the best course of action, your next decision is whether to seek long-term or short-term tenants.
Do you live in a vacation hotspot near the beach or the mountains? Would you still like to return and use your home for part of the year?
On the other hand, what if you live in the city or the suburbs? Is your home better suited for families with children or working professionals?
In that case, it might make more sense to look for long-term tenants who can commit to renting your home for a year or longer.
How to Rent Your House: Things to Remember
Whether you’re seeking short-term or long-term renters, here are some important things to keep in mind.
1. Improvements & Upgrades
At the very least, your home should be clean, empty, and in good repair before you start looking for renters. Make sure everything is up to code and have the carpets professionally cleaned before you show the home.
Beyond that, how much work (if any) should you put into the place? That depends on your area and the demographics you’re marketing to.
Keep in mind that your standards and the people you’re renting to may not be the same. Just because you prefer a glass door for your shower doesn’t mean a tenant won’t be happy with an old-fashioned shower curtain.
It’s also good to remember that most tenants will not care for the property as well as you would. There’s no point in making expensive upgrades that will go unappreciated–or could even be damaged and need replacing.
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2. Using a Property Manager vs DIY
If saving money is your goal, you can save a lot by handling everything yourself. But remember that what you save in hiring someone you’ll spend in time and energy.
What if there’s a plumbing emergency at 2 AM? What if your tenants stop paying rent and you need to evict them? What about advertising the home and finding tenants in the first place?
Before you take the DIY route, make sure you’re equipped to handle the challenges of property management. This includes taking out a landlord or bed-and-breakfast insurance policy.
What if your move is taking you to another city, state, or country? How will you handle maintenance issues or find new tenants when the current ones move out?
If you lack the proximity or expertise, it may be best to hire a property manager to take care of these things for you.
3. Finding the Right Tenants
As much planning and preparation you put into renting your home, nothing matters more than finding good tenants.
Include an application fee that will cover the costs of screening potential renters. As nice as someone may seem, you’re treading dangerous ground if you fail to investigate their history.
Start with a credit check and a criminal background check. They also need a steady source of income that should equal at least three times the rental price.
If those initial criteria check out, dig deeper. Ask for personal and professional references as well as previous landlords. Call and speak to those landlords about their payment history and how well they cared for the property.
You can also learn a lot about a person by studying their patterns. Do they move around or change jobs a lot? Are there unexplainable gaps in employment or rental history?
If something seems off or you see any red flags, don’t ignore them. Keep looking until you find a suitable tenant.
Final Thoughts on Renting Out a House
As you can see, there are a lot of factors to consider before renting your home.
Your best bet is to weigh your personal circumstances and decide whether it’s more practical to sell or rent your home.
Whichever path you choose, you’ll likely need to make some improvements before listing your home. Click here to learn how to find the right contractor for your project.