By Guest Blogger: Ted James
If you are in the process of moving, hustling to sell your home may add stress to the relocation process. Those who are in limbo between one residence and the next may find that turning their home into a rental is less of a headache than trying to find a buyer and may even make more financial sense in the long run. The National Lumber Family of Companies present some tips on how to turn your home into a long-term rental.
Is renting right for you?
Before you decide to transition your old home into a rental, check to be sure there are no restrictions preventing you from doing so. For example, town or city ordinances, or homeowner’s association rules. Next, do a financial analysis to determine whether your prospective rental will generate cash flow. Estimate what you’ll pay in insurance, taxes, repairs, and other property expenses, then how much you can reasonably charge in rent. Keep in mind that there may be periods during which the house is vacant, such as while you are looking for a renter.
Pandemic and public health considerations
The COVID-19 pandemic is affecting the housing market in diverse ways. It may be harder to sell right now since lenders are less likely to approve mortgages during uncertain times. Depending on your location, your home might be in demand as a rental. Of course, any home showings that you do should be conducted with public health regulations in mind.
You need to take into consideration that the rise in remote work means tenants are swapping expensive residences in city centers for more affordable options in more tranquil areas, or with better access to amenities.
Be aware, however, that tenants who get laid off or have their hours cut may find themselves unable to afford rent, possibly for months at a time. For various reasons you may have a period of vacancy, and you need to be prepared to pay for expenses on a rental that is generating no income.
Take care of the paperwork
Before renting your property, you will need to switch from a homeowner’s policy to a landlord policy. Comprehensive coverage won’t be sufficient; you will also need liability protection. Remember that if you don’t change your insurance, and something goes wrong, your provider could deny you any coverage at all, on the basis of fraud.
Another way to protect yourself and your assets is to form your business as a limited liability company (LLC) for your rental. As an up-and-coming covidpreneur, this might be especially handy if you anticipate expanding and purchasing more buildings to rent out. Even if you are only renting your former home, however, an LLC is a great way to protect yourself in case of a lawsuit or accident. Don’t be daunted by the prospect of forming your own company: Low-cost formation services can help you through the process, bypassing any prohibitive lawyer’s fees. Or you may even decide to take the leap and form your LLC yourself.
Refresh, repair, or replace
It’s possible that you may be able to rent your home as-is, with minimal changes. If you have any concerns about safety, consult a home inspector to make sure everything is up to code. Research comparable rental properties in your area and see whether yours can be competitive in the market as it is, or whether you will need to give it a refresh or remodel. Something as simple as a fresh coat of paint in neutral trending colors will help potential tenants picture themselves getting a fresh start in a new home. Whether you can paint by yourself or choose to hire a professional painter, a fresh coat of paint makes a good impression. Updated windows can make a significant difference—but try to factor these in early, so you aren’t hit with the unpleasant surprise of added repair costs later. National Lumber sells vinyl replacement windows, doors, and whatever other building supplies you need. If a single door or window needs to be replaced, ask about Bargain Bin choices. If the kitchen or bathroom cabinetry has seen better days, consult with an expert at Kitchen Views for advice on economical choices. If you decide on renting the property long term, you’ll want the cabinets to hold up to normal wear and tear. Beware of low cost outlet bargains. Pay attention to the cabinet box construction because low cost options may actually cost you more in the long run with repairs or replacement.
Depending on local ordinances, you will be expected to have at least some basic appliances in the home, such as a stove and refrigerator. If you have laundry facilities, that can increase the amount you can charge for rent. Up to date appliances in the home can attract tenants, but gently used appliances are fine as long as they are in good functioning order. Have the heating system serviced and don’t forget about the water heater. If it is past the warranty period, you may want to replace it before it becomes a problem. Such breakdowns never happen at a good time, and a leaking water heater can cause addition damage.
You will need to come up with a plan for managing the property, but long-term rentals are more hands-off than short-term rentals such as an Airbnb or vacation rental.
By opting to rent instead of sell, you can defer the anxiety of trying to find a buyer and focus entirely on negotiating a purchase and settling into your new home. After you’ve rented the property for a year or two, you can decide if you like the benefits of being a landlord or if you’re ready to sell. Perhaps your tenant will be interested in buying it.
House Image via Pexels