Preparing a Rental Property
Homeowners will put properties up for rent for many reasons. The current market may make it more difficult to sell than to rent. The owner may want use of the house in the future. Whatever the reason for renting, you will have to inspect, clean, repair it or hire contractors to do the job to prepare a home for rent,
It’s common to want the benefit of extra income to save money or pay down debt, or as an option to sell during a housing slump.
The motives are many, but this plan can become a trouble.
If you live in a tourist-friendly area, renting out your home as a short-term or seasonal rental may be a good option. Before signing up with a short-term rental group like Airbnb, find out which rules and regulations apply to your town and city.
Before you advertise that you plan to rent your house, take time to prepare your place well.
If preparing to rent your house, you’re probably looking to make money. Becoming a landlord by renting out your home can be a lucrative move. But how do you best prepare a home for rental? Here are five steps that will set you in the right direction and attract premium tenants.
How to rent your house out
Inspect your home
Thoroughly inspect it and repair major problems once your home is empty. Address potential issues, including sagging or clogged gutters, roof leaks, driveway cracks, electrical outlets, leaky taps or pipes, dodgy light bulbs and uneven flooring.
Think safety
Tenants will feel at ease if they have a safe place to live. Suppose you’re renting out a section of your home; secure and separate the rental area from the rest of your home. Ensure every smoke detector is in good working condition. Install fire extinguishers in the kitchen and each floor of the house.
Clean up
Nothing turns off potential renters more than a dirty place. Clean all floors, windows, and blinds and shampoo the carpets to remove stains. Repaint walls a neutral colour to make the rooms seem cleaner and brighter.
Evaluate your furnishings and appliances
Cleanliness is relevant to your furnishings and appliances, too. If you have valuable furnishings or fixtures, remove them to avoid damage. If you are providing a furnished home, make sure everything you provide is in good working order.
If you are providing in-home appliances, ensure they’re clean. Remember that renting a home with appliances may allow you to boost the rental price, but it can cost you if the devices require frequent repairs and maintenance.
Determine how to manage to rent out your house
If you plan to manage the rental, secure a legal lease document for you and your tenant. If you’re not overseeing your home, give yourself time to find a trusted property management company.
Most firms typically charge up to 12% of the expected monthly rent to manage the property. They will screen potential tenants, collect rent payments, handle repairs, and deal with tenant issues as required.
Notify your mortgage and insurance companies
It’s vital to contact your mortgage and insurance companies to inform them you won’t be living in the home. Your mortgage company has rights to the house to protect its interests. Once you’ve notified them of your intent to rent your home, you may have to meet specific mortgage-as-landlord requirements.
It would help if you switched from a homeowner’s insurance policy to a landlord property insurance policy. This will cover losses due to your tenant’s negligence, fire or water damage, or natural disasters.
Determine market value
Once your home is ready to rent, determine your monthly costs and evaluate comparable rental properties in the area to select your listing price. When posting the ad for rent, highlight desirable features to help sell the property to prospective renters. It also pays to be mindful of more attractive seasons to renters, like springtime.
Screen potential tenants
When you identify a potential renter, ask them to fill out an application listing their name(s), employer, previous landlords and references. It’s worth getting signed authorisation to check credit reports and their criminal history while being aware of landlord and tenant rights.
The Benefits of Investing in a Rental Property
In essence, investing in a place to rent out is one of the smartest ways to generate long-term, stable income.
It also offers several other benefits:
Property appreciation
The value of real estate increases over time, no question. Regarding selling, sellers will pay taxes on the appreciation or capital gains. Although a property’s value depends on supply and demand, real estate purchased in the right location is guaranteed to sell for a considerable profit.
Cash flow
Renting a property provides regular cash flow, another safe bet. But only as long as a tenant pays rent. When you receive a rental payment, the money you make after paying your mortgage, utilities, and other bills is yours to reinvest. The income generated from a rental property tends to be more predictable than other investments. Why? A rental payment provides a consistent cash flow higher than an ordinary dividend.
The Downsides of Owning an Investment Property
Nothing is without its downsides, which goes for renting out a property. When you buy an investment property, the initial cost is high, even without the expenses required to make the space ready for tenants. Paying a mortgage with rental income and unexpected changes, such as low rental demand or unreliable tenants, may affect your ability to make monthly mortgage payments.
Other risks of rental property are:
Liquidity
Depending on the market, your rental property may take a long time to sell.
Lack of diversity
Real estate is a concentrated asset, which means if something happens, your money is tied up in one investment rather than many small investments.
Unpredictable tenants
If a tenant stops paying rent, damages the property, or moves out without giving you notice, you can expect a temporary, sudden income loss.
Time and management
There is a lot to do; learning landlord-tenant laws, communicating with contractors, managing tenants, handling maintenance—it all takes energy and time. While owning a rental property may be a passive investment, it’s a very hands-on job for the landlord.
Expenses
You would know that owning property costs more than the purchase price, with expenses adding up. This includes property taxes, insurance, and other fees, like strata/owners corporation or repair costs.
Owning an investment property isn’t much different from owning your own place. However, when you are a landlord and managing tenants, you must have time, attention, patience, and legal knowledge on top of all your responsibilities as a homeowner.
Understand Potential Red Flags
Accidents happen; some people look great on paper but not so great in reality. When you rent out your home, you’re putting it at risk of property damage.
As the homeowner, you’re still responsible for any maintenance and repairs. You can protect your property through your contents insurance and lease agreement, but you may need to accept your home may not look like it did when you left it.
And don’t forget; eviction. Every state has its procedure for evicting tenants, so it’s wise to educate yourself on your jurisdiction.
Have a Good Lease and Insurance
If you have opted to manage your property yourself, you’ll need to understand insurance and leases in depth.
Insurance: If you’re renting your home rather than occupying it, homeowner’s insurance turns into a renters’ policy. Consider requiring your tenants to have rental insurance.
Property lease: Your lease will save you in the case of troublesome tenants.
It’s important to consider what the tenant must maintain and pay to repair. Include the following in your lease:
- Garden maintenance.
- List of utilities the tenant is responsible for.
- If the first person on the lease disappears, there is more than one lease signer.
When working with a property management company, they will take care of it for you. Getting a lawyer to look over your lease as a final step is best.
Understand the Responsibility Involved
Ask yourself; is being a landlord an obligation you can handle? There are numerous benefits of renting, like the ability to deter vandalism and squatting, easing tax breaks and generating income to cover the bills at a minimum, but possibly even creating a profit.
However, being a landlord is a responsibility you’ll need to fit into your life. It’s safe to assume that things will sometimes fail to run smoothly. There are many jobs involved: staying on top of repairs and maintenance, collecting rent, adjusting your homeowner’s insurance policy, and inspecting regularly.
Prepare Your Home for Renters
In a market downturn, you may not be able to get away with renting out your home without investing in any cosmetic improvement. Tenants are more attentive and fussy as the availability of rental homes increases, along with their expectations.
You can prepare for the new tenant by thoroughly cleaning your home and making sure your appliances are working and in good condition. If you’ve decided to rent a room or area within your house, ensure that it is secure and separate from the rest of your home.
Marketing Your Home
After making these preparations, it’s a good idea to list what makes your home appealing in readiness to put it on the market. Take note of commonly desirable features such as integrated refrigerators, air conditioning, car spaces, or garage.
Try these phrases to help you attract a renter: “stone benchtops”, “state-of-the-art”, “stainless steel appliances”, “timber flooring”, and “vaulted ceilings”. Be sure to use all of the property selling terms that best apply to your home.
Next, head to the property websites you’re thinking of using to post an advertisement for your home. Consider your local newspapers, too, if the readership is high enough. It is easier to do this via a nominated real estate agent who will work with you to help rent out your house.
A reputable property management company will also handle the legwork of renting out your house, but you will have to pay them, with the cost varying depending on whom you choose.
Hire Professionals to Help You Navigate the Financials
Flipping your home into residential rental property is not as simple as it seems. Still, you must talk with real estate solicitors and accountants to ensure you abide by tax laws, zoning and local property rules.
You may be eligible for tax deductions, but it’s critical you know which exact expenses are deductible. Be warned that there are limits on how much you can deduct each year, and the amount you can deduct may differ from the rental activity you report on your tax return.
A solicitor can also help you navigate landlord-tenant regulations, which vary per jurisdiction. They will also help you understand your city’s rules governing rental properties and help you draft the lease, ensuring it adheres to local laws. Engaging a solicitor can help you determine applicable emergency contacts and house rules.
You can set the cost of the rent by researching other rental properties in your neighbourhood and community and knowing your prices. Remember, potential tenants will be looking for deals, so if you set the rent at a competitive price and highlight all the most valuable aspects of your home, you’ll be sure to get noticed.
Determining Your Rental Price
It would help if you determined your monthly costs to run the rental property to set a rental price. Think about mortgage payments, plus additional expenses you will cover. Once you have a monthly figure, look at nearby rentals of comparable value. This will help you set your price.
When advertising your rental property, the price will be the main factor in drawing tenants and nailing the competition. Try to leave room to negotiate your price, and determine whether you will be charging a fee for late rent payments.
Are You Ready to Be a Landlord?
Excelling as a landlord won’t happen immediately. You may have to review your progress to make the job more efficient consistently.
But it shouldn’t deter you from your goal to own an investment property. By anticipating the realities of being a landlord, you’ll be better equipped to do the job and more confident while you become familiar with your new position.
By learning more about renting, you’ve already taken a big step toward educating yourself on the rewards and risks of property investment. With all these tips, you can put your knowledge to use and start your real estate investment journey.
