Turn Your Home into a Rental Property in 9 Easy Steps

30 Sep Turn Your Home into a Rental Property in 9 Easy Steps

Starting a real estate career by turning your home into a rental property is a common strategy for first-time landlords. Whether you want to build wealth or are not yet ready to part with your property, there are important steps to take before making this transition. Here are some guidelines to help you convert your primary residence into a rental property.

1. Carefully Weigh Your Options

If you have a mortgage on your home, you usually have to live in the house for at least 12 months before turning it into a rental property. Check your loan contract and get in touch with your lender to find out the specific rules that apply to your loan. Once you have lived in the house for the required period, you can start the process of converting your primary residence into a rental property.

It’s important to know the rules to avoid mortgage fraud. Occupancy fraud, where you claim to live in the home but buy it as an investment property, can lead to immediate mortgage repayment and potential foreclosure if discovered by the lender.

If you plan to move out of your home and buy another to live in, it’s important to find out if you can get another mortgage before you rent out your current house. Some banks may include the rental income when considering your new loan, but not always. It’s best to talk to your mortgage lender first before you make any decisions.

Check with your Homeowners Association

If your neighborhood is governed by a Homeowners Association, there might be restrictions on renting your house. Some HOAs have no restrictions, while others completely prohibit renting out houses. Some HOAs only allow a certain number of homes in the neighborhood to be used as rentals.

For instance, if the homeowners’ association (HOA) only permits eight houses to be rented out, you may be placed on a waiting list until a slot becomes available. Some neighborhoods will allow homeowners to rent out their homes in case of financial hardship, even if the community has reached its rental limit. You should also confirm who is responsible for paying the HOA fees each month/year. As you agreed to obey the rules of the HOA when you bought the house, it’s crucial to review them to avoid incurring fines.

2. Get Your Property Ready

Before you start listing your home, make sure it’s in good condition. Keeping your home clean and well-maintained can help attract renters and demonstrate that you take care of the property. Additionally, keeping up with regular maintenance tasks is important to meet the standards for habitability and to obtain necessary rental permits.

In order to attract renters and set a competitive rent price, you will likely need to invest in upgrading your house to increase its curb appeal. You don’t have to complete a home makeover all at once. Start by creating a list of the improvements you envision and complete the renovations over time.

To start off, go for budget-friendly improvements like giving the place a fresh coat of paint or updating the light fixtures. Updating landscaping and curb appeal before advertising the home.

Make repairs

Begin by making any necessary repairs and renovations. Ensure that everything in the house, including appliances, plumbing, and the HVAC system, is in proper working condition. Check the smoke alarms, fire extinguishers, and carbon monoxide detectors to ensure they function properly, and replace them if necessary. Additionally, look for signs of water damage, leaky faucets, cracked caulk, and burnt-out light bulbs.

Don’t forget to take care of things like termite inspections and electrical maintenance to get your home ready for renters. It’s important to address any issues before they cause problems for your renters and to save on maintenance costs.

Deep clean

Cleaning your home thoroughly can seem pretty overwhelming, but if you take it one room at a time, it becomes much more doable. Start by listing out all the cleaning tasks that need to be tackled, and gather up all the supplies you’ll need. Take some time to look into which cleaners work best on different surfaces, and be careful when mixing cleaning products.

Make sure to clear leaves from the gutters and remove any clogs from the drains. If your home is equipped with a washer and dryer, don’t forget to clean the dryer vent. If your home has carpet, consider hiring a professional carpet cleaner or renting carpet cleaning equipment from a home improvement store.

3. Do All Your Paperwork

Insurance policies for primary homes differ significantly from those for rental properties, so it is essential to switch to a landlord policy. If you file a claim with your primary insurance after converting to a rental, the insurer could deny your claim, leaving you responsible for paying out of pocket.

Remember to consider landlord insurance to cover damages to your rental property, like a tree falling on the house, and to protect against legal costs and medical bills in case your tenant is injured on your property and you are found liable. Remember to contact your insurance company when you decide to rent out your home.

Learn about potential tax changes

Your rental income is taxable, so figure out how your tax rate might change. Once you turn the house into a rental property, you might qualify for tax deductions for rental property expenses, like your landlord insurance policy or utilities if you pay for them.

Secure the required permits

Many towns require permits for rental properties to ensure safety. They’re usually not too expensive, but they’re a must-have in many places.

Normally, a local government inspector will examine the property for potential health and safety hazards. For instance, the inspector will analyze the electrical and heating systems, as well as the presence of adequate exits. Afterward, the inspector will provide the landlord with a report listing any required changes or repairs that must be completed to ensure the property is in compliance. Permit conditions can differ based on the location, so it’s advisable to reach out to your local city hall to determine whether you need one.

4. Plan for Some Maintenance

Before you start listing your rental, make sure to have a plan for managing maintenance requests. Renovations and good prices can bring in renters, but quick and efficient maintenance is what keeps them around.

Many maintenance requests involve regular upkeep rather than major repairs. It’s important to research common maintenance needs for each season and make sure you have the right tools and contacts to keep your home in good shape for your tenants.

Some landlords prefer tenants to contact them directly via email or text to request maintenance. Having a written request could help you later if your tenant has multiple requests for the same problem. 

5. Consider the Financials

Consider all financial factors, like rental expenses and your home’s value, before setting a rent price. It’s important to find a balance between setting an attractive price for renters and making a profit.

When you decide to rent out your home, there are startup expenses to consider when setting the rent price. Home inspection costs, permitting fees, repairs, renovations, advertising costs, and renter turnover expenses can vary based on the size and location of your home. It’s important to research the going rates in your area to understand these costs.

Don’t forget to consider recurring expenses such as routine maintenance, pest control, and insurance premiums, in addition to one-time costs. If you’re including utilities in the rent, make sure to calculate the regular costs for heating, electricity, and water for the house. Charging utilities separately might be easier if your tenants’ usage varies each month.

After figuring out your expenses and comparing rental prices in your area, it’s time to decide on the rent for your property. The goal is to set a price that allows you to make money while staying competitive with nearby rentals. Make sure the rent covers all costs but is similar to other rentals in your area.

You can always change your rent price, but it’s better to lower it than to raise it.

6. Set Up a Payment System

Before drafting your lease, you’ll need to decide how you will collect rent. While it is possible to request cash, checks, or money orders for rent payments, an online rent collection platform can save you a trip to the bank and provide your tenants with flexible payment options.

Using an online system to pay rent may not appeal to some renters. However, explaining the advantages of online rent payments can help convince tenants to give it a try. On the other hand, renters who like automated processes may find an online payment system attractive.

7. Draft a Lease Agreement

Most lease agreements have similar agreements, but each rental property has its own rules and policies. A typical lease agreement covers details such as guest policies, pet policies, HOA rules, subletting policies, reasons for eviction, and due dates for rent and fees. Your lease should also explain how to submit rent payments and maintenance requests.

It’s important to understand certain laws before creating a lease. Federal and state landlord-tenant laws and fair housing laws are crucial to avoid violating a tenant’s rights. Although first-time landlords may make mistakes, knowing these laws can help prevent negative situations. Consulting with an attorney is recommended to refine the language in your lease.

8. Market Your Rental

Now that your rental home is all set for new tenants, it’s time to find some great people to lease with you! Your home’s location, size, and amenities will attract specific demographics of renters. Identifying the renters most likely to be interested in your home will help you pinpoint which amenities to highlight.

Remember, good photos are important when you’re trying to rent out your home. They’re the first thing potential tenants will see. You don’t need to hire a professional to take the photos – if you learn a bit about staging and taking photos, you can use your smartphone to take good pictures that will attract renters.

Prepare your home first. If it’s furnished, remove clutter and add decorative accents. Then, choose the right time of day to take photos of your rental. Good lighting and angles can show renters a warm and welcoming environment. Focus on the interior when taking photos. Listings with a living room shot as the primary photo are more attractive to potential tenants.

The property description within a rental listing provides an opportunity to present your home in its best light. Emphasize recent renovations or upgrades, neighborhood amenities, and nearby attractions. Create a compelling description describing the experience of living in your rental property.

Be clear about costs, lease terms, and pet policy to attract serious inquiries.

To guarantee compliance with the Fair Housing Act, do not express a preference for or against any groups. Violating the Fair Housing Act may lead to a lawsuit.

9. Time to Screen Tenants

Before becoming a landlord, the final step is to find and screen tenants. This step is crucial because the person you choose to lease your rental to will be your customer for the duration of the lease. Having an empty unit is better than having a bad tenant. Therefore, be selective about what you require from applicants.

When screening applicants, it’s important to carefully review their rental and credit history to determine if they would be a good fit for the property. As a landlord, you have the right to select tenants, but it’s crucial to comply with the Fair Housing Act. When making your decision, it’s essential to focus on objective criteria such as insufficient income, negative credit or rental history, or a criminal record. These factors should be the basis for your tenant selection process to ensure fairness and compliance with the law.              

When seeking a landlord reference, you gain valuable insight into the rental habits of potential tenants. Connecting with a landlord reference offers a window into any potential issues that may not be evident in a credit or background check, such as the applicant’s communication approach and overall behavior as a tenant.

You can ask for a reference from the landlord in your rental application and have a part where the applicants agree to you reaching out to their references.

Don’t have time to handle everything on this list? Let Sound Choice Real Estate Handle Everything for You!

If you’d like some help from our team of professionals at Sound Choice Real Estate please Click Here or give us a call at 850-389-8533 to Contact Us.

Sound Choice offers full-service property management in Niceville, Destin, Crestview, Fort Walton Beach and the surrounding areas. We are dedicated to providing a maximum return on your investment and eliminating hassle and stress.