For many reasons, you might need or want to move to another property and are looking for a profitable way to maximize your real estate investment.
When economic conditions are not good enough to fetch a good price for your property, selling it will not be a logical move. An available option is renting out the property while waiting for an economic upturn or a satisfactory buyer.
If you are not in a particular rush, you can wait for a seller’s market to optimize your investment returns.
You can still generate an income in the meantime by allowing tenants to occupy your property. It is much better to wait until market conditions are better to sell your property investment.
Aside from the potentially high sales profit you will get in the future, there are a lot of benefits when you choose to rent out your housing unit.
- You can earn from a monthly passive income source. The rental proceeds can be used to pay off a new property if you decide to purchase another one. Alternatively, you can build more property value by investing in renovation projects through the income you receive from your rental.
- Better market conditions lead to higher profits so you can price your property better in the future.
- Maximize the tax breaks from renting your property. You can deduct the costs of operation which results in lower tax payments.
You can get started on converting your home into a rental property by performing the following steps.
Evaluate Your Landlord Responsibilities
On paper, it may feel like you will only collect the monthly rent and you’re done. However, being a landlord requires you to fulfill expectations and responsibilities under the law.
You must ensure that you provide renters with a home that is livable, clean, and well-maintained.
You must advertise your rental home, conduct tenant screening and property inspections, create a lease, schedule regular property maintenance and repair, collect the rent, and review financial reports.
When urgent situations occur, you are expected to resolve emergencies. Another task is to enforce the lease agreement and respond to maintenance requests from renters.
If you are open to converting your residential property into a rental place but are too busy to attend to the day-to-day running of your rental unit, you can always engage in the services of a trusted property management company.
See if You Qualify for Another Mortgage
You might need to look for new housing if you plan to move. Research different lenders and request an assessment to check if you can be approved for a mortgage.
There may be lenders who are willing when they see the consistent monthly profit you earn from renting your property. It is recommended to go through an evaluation to find out about your eligibility for another mortgage.
Update Your Insurance Policy
A landlord's insurance will vary from a homeowner’s insurance. The former will have better coverage considering the risks faced by every landlord.
It is advisable to get landlord insurance to protect your property from a multitude of risks.
Note that you will be dealing with more wear and tear the more people stay in your rental unit. You are also likely to encounter damages caused by tenant neglect or abuse. This is why landlord insurance will be costlier than the homeowner’s insurance.
Landlord insurance generally covers:
- Minor accidents and injuries that took place in your premises
- Legal fees when a tenant files a lawsuit against you
- Structural damages in your property
- Exterior property damages
- Rental loss when property damage is being repaired and the rental unit is unfit for residence
Hire a Professional Property Inspector
Tenant complaints can be stressful to deal with. You can avoid this common issue by engaging the services of a home inspector to thoroughly assess the present damage in your home and find solutions quickly.
Taking this initiative reduces landlord-tenant conflicts later on since you ensure your rental has functional home systems and renters won’t have concerns.
Often, property issues will involve pest infestation, such as bed bugs and rodents. Other problems are mold presence, sloping floors, and foundation problems.
If landlords don’t pay immediate attention to these, the repair expenses will continue to build up as the issue escalates.
You should be alert in fulfilling your duty of providing a safe, habitable, and hygienic living space to your renters.
Prepare Your Rental for New Residents
To start attracting tenants that stick around for the long term, you need to make property improvements and start renovations.
By enhancing your property’s value through curb appeal improvement and upgrading kitchen and bathroom furnishings, you stand a better chance of welcoming top-quality renters.
You have to be thorough when performing a property inspection. Replace broken appliances, fix minor damages, and add more storage since these tasks make renters happy.
You can also invest in professional cleaning to present a pristine rental space and capture better images when advertising your rental space.
Learn about Tax Changes
You get a new tax rate when you profit from a home you converted into a rental property. This income is taxable but there are tax deductions you can take advantage of when you own a rental property.
Here are some of the tax-deductible rental expenses:
- HOA fees (Homeowner’s Association)
- Utility bills (if you’re paying for it)
- Landlord insurance costs
- Repair charges conducted to the unit
- Mortgage interest payment
- Property tax expenses
Consult a tax professional to optimize your tax deductions.
Bottom Line
It’s challenging to convert your home into a rental property but there are pros to waiting until market conditions improve to sell off your real estate.
You also have the option of hiring a reliable third party like Mark Thomas Properties Property Management to ensure your rental operation is smooth. Contact us today!
