The housing market has increasingly become a rental-driven market, with the proportion of renters outpacing homeowners. If you own a home or plan to purchase one soon, turning it into a rental property could be a lucrative opportunity.
Converting your home into a rental is a bigger financial decision than it may seem, but with the right approach, you can reap the benefits of rental income, long-term equity gains, and investment returns that outpace inflation. Let’s find out how to convert your home into a rental property.
Before turning your home into a rental property, make sure you understand all that is involved with being a landlord. It requires time, money, and the willingness to deal with tenant issues. Think about if you have the capacity to handle emergency repairs, noise complaints, non-payments of rent, and even the occasional eviction. If you go into landlording with realistic expectations, it can be a good source of income, but it is not always easy money.
Once you decide to become a landlord, you need to prepare your property for tenants. This means ensuring everything is clean, in good working order, and code-compliant. Make any necessary repairs to appliances, plumbing, electrical systems, and the roof or exterior.
Fresh paint, new carpeting, and landscaping can help make your property appealing to renters. You should also organize warranties, owner’s manuals, and service records for all appliances and mechanical systems.
Do research on comparable rentals in your neighborhood to determine a fair monthly rent. You want to be competitive to attract good tenants, but still high enough to make a profit after expenses. Think about including certain utilities or amenities in the rent to provide more value.
Run the numbers to make sure your rental income will cover the mortgage, taxes, insurance, maintenance, vacancies, and other costs. It is also a good idea to speak with a tax professional about how to properly report your rental income and deductions.
Now you are ready to list your rental property to attract tenants. Good marketing is key. High-quality photos, video tours, and compelling listings on real estate websites are a must. Consider using a property management company like Charlotte, NC real estate or real estate agent to help market your listing to a wider audience. Be available to show the property on short notice and make sure your showings are well-organized.
Screening tenants is one of the most important parts of being a landlord. Run credit checks, background checks, and contact references to verify employment and previous residences. Meet prospective tenants in person to get a sense of how responsible and trustworthy they seem.
Discuss the specifics of your rental terms and lease before signing any paperwork. Following good screening practices will increase your chances of finding tenants who pay on time, do not damage property, and stay long term.
Once you have rented your property, your work does not end. Continue maintaining the property by performing routine inspections, repairs, landscaping, and any emergency maintenance needed. Collect rent payments on time and enforce the guidelines in your lease terms and rental agreement.
Make yourself available to tenants to address concerns and requests. Set policies to handle things like late rent payments, lease renewals, and move-out procedures. Effective maintenance and management will keep good tenants long-term and continue providing a source of income from your rental investment.