Sometimes it makes more sense to rent a home than it does to sell it or, perhaps it holds sentimental value and you’d like to keep it in the family. If you expect home values to increase in your area, you can reap the benefits of future property appreciation if you hang on to the home for a few years. It can also be a good source of passive income, if priced and managed correctly. Regardless of reason, your chances of having a successful experience as a landlord increase if you do some homework – and perhaps a bit of physical labor – first.
Make it “their” home, not yours
The things you like about your home may not be the same things your future tenant will like. Even if you don’t know exactly who they are yet, you can get a pretty good idea from the neighborhood demographics, which may have changed since you first bought and moved into your home. Is it mostly young families who will care about quality schools? If it’s been a while since you’ve had children in school, you can check your school’s most recent report card online. On the other hand, if your neighborhood is filling with retirees, retrofitting your home with a few accessibility features like ramps and handrails can increase your rental appeal.
When making changes, keep an eye toward your home’s future value, as well. Contact your energy company to see if they offer a complementary energy audit, giving you tips on making your home more energy efficient. A fresh coat of paint is an inexpensive and worthwhile investment, and while more pricey, kitchen and bath renovations tend to pay off when it does come time to sell and are enticing to renters in the interim.
Your landscaping and outdoor spaces should also fit the demographic you’re more likely to attract. Parents will appreciate a fenced yard, while older tenants may welcome low-maintenance spaces – with perhaps a small area or raised planter boxes where they can dabble in some gardening.
Make any necessary repairs while you’re sprucing up your home. You may have gotten used to the quirky water heater that groans on the hour, every hour, or the electric wall switch that you have to tape down with electrical tape to keep the lights on, but your tenants are more inclined to label those as inconveniences rather than charming idiosyncrasies.
Evaluate the practical considerations
One important consideration is whether you want to manage your rental home yourself or hire a property manager. When evaluating the pros and cons, here are some key questions to ask yourself:
- Are you handy enough to make most repairs yourself?
- Are you close enough to the property so that travel time is reasonable for both you and your tenants?
- Do you want to be tied down 24/7 for emergencies, such as air conditioning problems or water leaks?
- Do you have the desire or the fortitude to negotiate late payment issues, or initiate an eviction process?
- Can you keep up with local regulations and ensure your continuous compliance?
If you answered “no” to any of these questions, then you should give serious thought to hiring a property manager. Be sure to price your rent accordingly so the cost doesn’t significantly decrease your profit.
You also need to evaluate the competitive landscape to determine how much rent you are likely to get. This will vary by city or geographical region, but also by neighborhood within cities. In San Antonio, for example, apartment rental costs fall below the national average compared to most U.S. cities, and the cost of housing overall is also lower when comparing the national cost of living figures. Private homes that offer more space and privacy can often attract more rent, depending on what amenities your target renter wants.
Another key consideration is being able to attract desirable tenants – meaning, can they afford the rent you’re asking, and do they have a good rental history? You can ask for rental references and check them out, but you should have some knowledge of what questions to ask in order to get the most helpful information. You may also want to query their employer about their employment status and history, as well as verify their stated income.
One efficient way to attract and locate potential tenants is to list your home on rental sites, like Rent.com. These sites allow prospective tenants to search based on relevant filters such as location, size, rental price, and other considerations such as pet restrictions and deposits.
Ultimately, who you rent to is within your discretion (as long as you follow applicable laws). If you are concerned about a tenant’s employment stability or income-to-rent ratio, for example, you can always request a larger deposit.
Creating a landlord-tenant “win-win”
Doing your research first and understanding the pros and cons of renting out your home helps you manage your expectations. If you do decide to turn your home into a long-term rental, know that you are providing an important service that offers mutual benefits: providing safe housing to someone who needs it while allowing your home to work for you as an investment tool.
You can find other helpful articles like this at 2Halls Property Team.