Many people want to be “in it for the long haul” with real estate, as buying a rental property is a great way to potentially grow your money over the long term. However, there is a lot to consider. Here are 5 questions to ask before renting out a property:
1. Are you ready to be a landlord?
Rentable properties can be a great source of income, but they also come with headaches. Regular maintenance and repairs are expensive.
And the timing is never convenient. What if you get a call at night or on the weekend that the furnace is no longer working, or there is a leak in the roof? These are types are issues that will require immediate attention and can’t wait until next week.
And let’s talk about the tenants – will they pay on time? Will they be clean? How do you screen tenants? Make sure you are prepared to deal with the headaches before you decide to commit.
2. Legal & Tax Implications?
Once you decide that you’ll be able to handle the property management, and the finances makes sense (aka you’re profitable), you need to cover your basis with both legal and tax implications. Talk to an accountant, do your research on tax implications and housing laws long before you dive into searching for tenants. Seek legal help to draft a lease agreement that will cover you and your home appropriately. The last thing you need is a lawsuit against you!
3. Will your tenants have pets?
You’ll need to determine up front if you’re ok with any pets your tenants may bring into your home. Are you OK with a tenant’s dog or cat? Or will your tenant lie about a pet just to secure your rental? That may be a bit extreme, but you need to cover all bases when it comes to your property
Also, be aware that you cannot say no to a tenant that requires a comfort dog.
4. Will your tenants have any habits your home can’t handle?
When you rent out a property, you’re trusting someone to take care of one of your greatest investments. That’s scary. You’ll have to consider some tenant habits that could affect your home. This could be anything from smoking to recreating scenes from the TV series Breaking Bad. The wrong decision could end up costing you thousands of dollars. Do your background checks and screen your tenants.
5. How much will you charge for rent?
OK so you’ve decided you’re ready to take on the challenge of becoming a landlord, and all the risks associated with it. You now have to determine how much you’ll charge for rent.
Going into this process, you should have a general idea of what current market rents will yield. You’ll also want to know ahead of time if your rent amount will exceed your mortgage payment. Otherwise, renting won’t make sense!
Have a realtor run some numbers for you, and make sure you’re 1. Charging the correct market rent amount and 2. Profitable on a monthly basis.
It’s not easy to become a landlord, but if done correctly it can be a great way to grow your investment over a long period of time. Do your research, consult with professionals, and make sure you’re in a good financial position before you consider making the commitment.