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As we all continue adapting to a new “normal” amid the COVID-19 outbreak, each day seems to bring new questions and uncertainties. This sense of uncertainty has hit the real estate sector, with home prices dropping in some markets. Some families who were planning on buying or selling their home this spring have decided to wait, but others want or need to move anyway. If you’re planning to move but are still worried about selling, one option is to turn your home into a long-term rental property instead.
Consider Legal and Financial Issues
The first thing you should consider is that there will be financial and legal issues involved with turning the property into a rental. As the website verticalRent explains, these financial issues primarily involve your mortgage, insurance, and taxes. Most mortgages specify a period of time in which the home must be your primary residence (typically one year), so you’ll need to make sure you’re outside this window.
Another thing to keep in mind is that you will need to change your insurance so that it covers the home as a rental property, as well as yourself in the form of personal liability insurance. Make sure you’re also familiar with the tax implications of turning your home into a rental property. The Nest provides a great summary of the tax changes you can expect, but it’s also a good idea to discuss these questions with your personal accountant.
Tackle Maintenance Projects
The first rule of being a good landlord is to keep the home in excellent condition. You will inevitably run across maintenance issues after tenants move in, but the smart thing to do is identify and fix any problems now in order to prevent future issues. Start by looking at your home’s main systems, such as the AC unit, and determine if any should be replaced. The last thing any tenant wants is to be left sweating on a hot day, and for your part, replacing it now can help you avoid paying for repeated service calls. As you start listing which projects need to be done most, make sure to research costs (e.g., installing a new AC unit averages around $5,600).
Before you move out (and tenants move in), you’ll also want to do some regular seasonal maintenance. And if you haven’t yet, now is the perfect time to take care of your spring maintenance list, including checking the roof and cleaning gutters (servicing serious clogs could cost over $500).
Appeal to Renters
In addition to making repairs and replacing anything that’s old and worn out, take some time to make cosmetic upgrades, too. Just as an updated kitchen and bathrooms help sell a house, these same upgrades can also attract good renters. Small projects can make the home more appealing, too, including giving the home a fresh coat of paint and working on curb appeal.
You may even want to stage the home similar to how you would if you were selling. Staging is a great way to highlight the home’s best features, and it gives you a chance to focus on what tenants are looking for. Does your home have a room that can be used as an office? With more people working from home during the COVID-19 pandemic, potential renters will appreciate having a work space.
If you’ve never been a landlord before, there’s a definite learning curve involved at first. This learning curve (and the uncertainty of trying something new) is the main reason homeowners hesitate to take this step. Let’s be honest, though: Nothing in life is certain. When you weigh the pros and cons, you may find that the rental market holds more promise than selling, and taking the risk will be worth the reward.
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