Renting Out Your Old Home: The Ultimate Guide to Becoming a Landlord

Investing in real estate is a great way of building wealth. To start building your real estate portfolio, one smart strategy is to hold onto your starter home after you build or buy your second home. In a healthy real estate market, you will quickly build equity and use the rent to cover your mortgage. However, while becoming a landlord and making money may seem easy, there’s more to succeeding as a landlord. Therefore, before you take the plunge, you may want to read the following guide on how to rent out your first home.

Understand your responsibility as a landlord

First, you should determine whether you can handle the obligations of a landlord. There are several benefits of renting your property, like generating income, deterring vandalism that often happens in empty homes and the ease of tax breaks. However, as a landlord, you have the responsibility to repair and maintain the property, pay your homeowners insurance, collect rent, and screen tenants.

Prepare your home

In the competitive real estate market, you won’t be able to rent out your home as-is. Tenants are choosy and have high expectations. Therefore, you will need to make your home more appealing by deep cleaning your home and ensuring that all appliances are in good working condition. Get electrical installation condition reports to ensure that all electrical appliances, fuse boxes, and wires are working properly.

Decide how much rent you will receive

You can’t just decide how much rent you will charge. Rent is controlled by the market, and the only way to come up with a fair market rent is to do some research. Ideally, you should rent your house for the same amount as other properties in a similar location, condition, and size.

Conduct a background check

There are several ways to run a background check on a potential tenant. Additionally, most property management applications have screening tools that can help you. However, before you even start screening your rental tenants, you should first decide what background and credit information you will allow. Generally, some of the things you should look closely include:

  • Prior evictions

  • Felonies

  • Bankruptcy

  • Criminal record

  • Bad financial history

After you identify the right tenant, inspect the property and take photos of the house before move-in. Remember to also ask for a reasonable security deposit and agree on the appropriate payment schedule.

Consider hiring a property manager

Do you want to receive calls at 3 a.m about a clogged toilet? If not, you may want to use a property manager.  Your property manager will handle everything from collecting rent to scheduling maintenance and repairs. Although you will have to part with a small fee, you won’t go through the hassles of screening tenants, advertising your property, keeping track of financials, issuing legal notices to tenants, filing evictions, or enforcing rental policies.

Bottom Line

There are several reasons why you should rent out your first home after you buy a new one. Although there’s no format to succeeding as a landlord, taking the time to understand your responsibility as a landlord, preparing your home, deciding how much you should rent, screening tenants, decorating your house, and hiring a property manager will increase your odds.

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