There are a few reasons you might choose to rent out your primary residence. If you have to move for work but you want to retain your residence in the meantime, renting it out is a great way to keep paying your mortgage until you return, building equity even though you’re not currently in residence. Or you might want to lower your own monthly payments by moving into a less expensive rental and letting someone else make your mortgage payments for you, potentially even putting a little extra cash in your pocket in the process. Perhaps you own several residences and it makes more sense to rent out your primary family home in order to earn the greatest passive income from your property. Whatever your reasons for renting out a primary residence, however, there are a few things you need to consider before allowing tenants into your home.
- Clear out the property. Some homeowners elect to leave certain areas of the house off limits for the purposes of storage when they become landlords. But this is probably a bad idea for a couple of reasons. For one thing, the more square footage you free up, the more you can charge for rent. In addition, however, you don’t necessarily want to trust your valuables in a home occupied by strangers. Even if items are stored in a locked area, it might not be enough to stop tenants or their guests from poking around in search of something of value.
- Set the rent. You’ll need to take the time to look at comparable rental properties in your area before you decide on how much rent to charge. While you certainly want to get as much income as you can from your property, you also need to price competitively in order to get tenants in the door. Just make sure to account for all of your own costs, including mortgage, property tax, insurance, and even basic annual maintenance when you set the price.
- Require renter’s insurance. As the homeowner, you almost certainly carry homeowner’s insurance on your property. But this probably doesn’t account for damages caused by tenants in residence at the home, or damage caused to their stuff in the event of a natural disaster, a break-in, and so on. For this reason you should definitely require renter’s insurance. This way if there is a flood, a fire, or some other issue, you won’t be liable to replace the items damaged in the disaster. And your renters won’t have to pony up the dough to repair your property.
- Create a lease agreement. It’s important to have a signed contract in place to ensure that your renters understand the rules and to give you a legal leg to stand on should you end up in a dispute that goes to court.
- Consider hiring a property management company. This is an especially good idea if you’re going to live out of state and/or you have several properties. But if you’re not particularly handy, you don’t like collecting rent, and you’re not interested in fielding complaints from tenants, hiring a reputable property management company like Greenlee Realty Group could be the right solution.