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How Do You Convert Your Home into a Rental Property?
Are you considering turning your current home into a rental? Maybe you want to pad your income and save for specific long-term goals. Perhaps your house has been sitting on the market and losing value. Or, maybe you inherited the home and are not ready to sell it.
Whatever your reason, owning a rental property could be an excellent investment opportunity. But to get the most from your investment, you must consider the financial implications and make the necessary changes to your property. Gen X Plumbingwants to help you do just that!
Setting Up a Business
You will need to view your rental property as a business to protect yourself from liability and potentially receive tax benefits. Many real estate investors establish an LLC for those very reasons, and this business structure is also more flexible and requires less paperwork than some others.
Of course, there are state regulations around LLCs, so you will need to make sure you understand the rules in your state before setting one up. Or, you can hire a formation service to do most of the work for you and ensure your LLC is compliant.
Don't rely on your homeowners’ insurance for your rental property because you will be responsible to some degree for your tenants’ safety. A homeowners policy will simply not be enough.
Also, you must consider the property itself. If there was a natural disaster or another event that caused significant property damage, you will want to be covered by insurance so that you don’t have to cover all the costs of repairs.
Making Repairs and Upgrades
Chances are, you will need to upgrade your property on some level to prepare it for renters. Start by evaluating each space for necessary repairs. If there are drywall holes, leaky faucets, broken molding, or any other quick fixes, you can probably handle them yourself. But you will also want to make sure the roof, plumbing, electrical, and other major components are in good condition; invest in if necessary, such as Gen X Plumbing!
Take time to research home features that are appealing to renters and buyers. You will likely want to deep clean the home, replace the carpet, and throw a fresh coat of paint on the walls. If you notice any outdated features (e.g., lights, hardware, blinds, etc.) those are areas you will want to improve as well.
Establishing Rental Rates
You will want to crunch numbers and research the market before setting a rental rate. Start by listing all the expenses associated with your property, including the mortgage, property taxes, HOA fees, utilities, and cost of repairs. Then, estimate how much you will need to spend on maintenance and repairs once you bring in a tenant.
After that, decide on your goal monthly profit, set a rental rate, and research comparable rentals in your area to make sure you will not be charging too much or too little.
If you have a property manager, you may not have to worry about being too involved in the tenant screening process. But if you will be screening yourself, there are several ways to go about it. The most common approach is requiring the tenants to meet a specific credit score threshold and conduct background checks.
Getting a Property Manager
If this property will be your first rental, you might consider managing it yourself to save money and maximize profits. Then again, it depends on the specific property because if you will have to spend a significant amount of time from work and other responsibilities to tend to the property and your tenants, it may not be worth it in the end.
Turning your home into a rental property is an excellent way to diversify your investment portfolio and supplement your monthly income. But if you want to succeed in real estate investment, it’s essential to learn as much as possible about the business and take all the necessary steps to prepare your finances and property.
Keep the information and advice above in mind as you prepare to become a landlord. And keep researching other methods that have proven to help many real estate investors over time.
Would you like to read more helpful content or learn about our top-notch plumbing services? Visit GenXPlumbing.com today!