6 Ideas for Turning Your Vacant Home Into an Investment
Has your home has been on the market for a long period of time and you’ve determined that you can’t sell it for profit? Maybe you have an extra home due to an inheritance, or maybe you just want to supplement your income.
Regardless of your reason, you’ll need to get your house in order, both financially and physically before you can rent it. There is a lot to do before you take on your first tenants. The following are 6 tips complied by Tim Parker of Investopedia, to help turn your home into a rental property.
Although you already have homeowner’s insurance on your home, that isn’t enough if your home serves as a rental property. Any time you have people on a property that you own, you take on some degree of responsibility for their safety. (For related reading, see The Beginner’s Guide To Homeowner’s Insurance.)
The requirements will vary by state, but in order for a residential property to serve as a rental property, a permit is required. The purpose of the permit is safety oriented. Often, an inspector from the city will inspect the house for various safety hazards including electrical, heating, adequate exits from the home, and other health and safety concerns. These permits aren’t expensive, but they are required.
3. Repairs and Upgrades
In addition to the basic requirements, remember that just as you would if you were selling your property, anything you repair or upgrade adds value to the home and makes it more appealing to those who are comparing your rental property to others. Make sure it is clean, freshly painted, and anything that looks severely dated should be replaced. You will want to build the costs of the upgrades into your rental rates so don’t go overboard, just do the things that matter.
4. Figure out your Rental Rate
List all of your costs and what you would like to see as a monthly profit. Don’t forget to add into your costs a premium for any repairs you’ll need to make during the course of the lease. Once you arrive at a rental rate, check rental rates in the area for a house comparable to yours. This gives you an idea of how competitive your rate will be to others.
5. Finding a Tenant
Before searching for tenants, be sure to understand the Fair Housing laws and run a credit check. Credit checks may become challenging without the right resources. Even if you were legally allowed to judge tenants based on your intuition, experienced landlords will tell you that first, there is never a perfect renter and second, gut feelings are often wrong. You will most likely need the help of an attorney if you plan to make your own application and contract, but a property management group can help you with the rental paperwork.
6. Property Management Group
If your rental property is not near your own residence or you don’t want the headaches that come with the day to day tasks of being a landlord, consider hiring a property management company to serve as the landlord for you. A property management company will handle all paperwork, take care of the repairs, collect rent and communicate with the tenants. The company will often charge an average of 10% of your rent for this service. They will also take care of the legal procedures for evicting tenants. One of the largest worries that comes with renting a property is when a tenant doesn’t pay. Evicting a tenant is a legal process that takes time and resources to complete. Although the landlord can’t control the actions of their tenants, avoiding eviction procedures whenever possible is advisable due to the cost, time and potential damage to the property as a result of disgruntled tenants.