Things to Consider Before Renting Your Home

There are a lot of high-net-worth real estate investors out there, and we believe there's still plenty of opportunity to gain wealth by investing in real estate!  However, there's a huge difference between someone who owns thirty homes and has them professionally managed, and an owner who is considering taking that first step -- keeping and renting their existing property while moving to another one.

First, you will have to determine whether you are financially able to do this.  Ask your lender whether it's a viable option with your income and other debt.  Most lenders will not consider your rental income until you have been a landlord for a year (in other words, you will need to be fully capable of making both payments without rent income), so check to be sure you can qualify for the mortgage you want while keeping the one you have.

There are many other considerations -- here are a few:

1. How often will you inspect your rental home?  Some landlords give themselves the right to enter the home to change filters, inspect mechanical systems,evt., every couple of months.  This also gives them an opportunity to ensure the tenant is keeping the home in expected condition.

2. How will you collect the rent -- by mail, in person, etc.  What will you do if a tenant says they have too many other bills (medical problems, car broke down, holidays, back-to-school, etc.) and can't pay?  Do you have the personality to deal with this?

3. Do you understand how long it takes and what it costs to evict a tenant in your area?  If not, it's worth discussing this with an attorney -- it's a serious matter.  The tenant may occupy your home for months without paying you.  How will they treat your home once the relationship has gone sour?

4. What will happen to your insurance premiums on the home?  You won't be insuring contents, but your home will be "tenant-occupied", which increases risk in the insurance companies' eyes.

5. Will you allow pets?  How many?  What type?  How big?  What will you do if tenant violates your rules?

6. Making repairs is part of life for a landlord.  Who will take calls from your tenant(s)?  Who will do the work?  Do you have access to handymen, trades and other resources to keep the home in good condition while it's rented?

7. Have you checked with your homeowners association, condo board, etc. to see if you're allowed to rent your home at all?  Some neighborhoods or complexes prohibit rentals, while others limit rentals to a certain percentage of the total neighborhood. 

It's important to properly "vet" your tenants BEFORE you accept a deposit or sign a lease on your home. Many tenants are good people and will take care of your property as if it were their own -- but some are not!   Resources such as the National Tenant Network allow landlords to see how tenants have treated other landlords before you commit.  Maybe they have never physically been evicted, but do you want them if they have been within fifteen days of eviction on their last two properties?

The bottom line -- answer all of these questions honestly,and think about the impact on your life before renting any home you own.  In many cases, it's an excellent way to build wealth!  But be sure you are property informed before putting up the "For Rent" sign!

Please call us if you want to discuss!

Steve

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