If you’re thinking about selling your home, there may be a better option.
Why don’t you consider converting it into a rental property, especially if it’s located in a prime location with rental demand.
Rental properties are a good source of passive income and you are also set to enjoy a number of tax advantages and benefits. In addition, provided that economic conditions are favorable, your property might appreciate in value over the years.
In this post, we are going over everything you need to know if you’re looking to convert your home into a rental.
A Change of Mindset
The first step might seem quite basic, but it is the difference between success and failure.
Before deciding to rent out your home, you need to be aware of the responsibilities that come along with it. As a landlord, you’ll need to spend hours conducting maintenance, filing relevant paperwork, advertising the vacancy, and managing the tenants.
If you don’t have the expertise and practical experience to handle the management of your property, it might be in your best interest that you hire a property manager. They would be able to handle the daily needs of your property. And while it might cost you a percentage of your rental earnings, you will free up valuable time and possibly increase the size of your investment portfolio.
Securing a Mortgage
With the passive income, you might be eligible to secure a mortgage that will go into the purchase of another home.
Once you have made the decision to lease the property, sit down and do a small write-up, analyzing the performance of similar units in your neighborhood. Take into consideration the vacancy period, the potential for tenant turnover, and the management and maintenance costs.
These numbers will serve you well as you will be able to bargain with the banker on the mortgage repayments.
Insurance Policy
You’ll need to insure the rental property in case of any damage to the property as a result of mishaps. To do so, you’ll need to change your current homeowner’s insurance policy to a landlord’s insurance policy.
Rental properties are more susceptible to wear and tear. And as a result, the insurance company is taking a greater risk by insuring the property.
Expect to pay a higher premium for a landlord’s insurance policy.
The landlord’s insurance policy covers the following:
- Structural damages
- Appliances and equipment in your possession
- Outdoor amenities, such as pools and sheds
- Legal fees in case of any disputes
- Property damage caused by fire, hail, or lightning
Inspection of the Property
As mentioned earlier, as a landlord, it is your responsibility to ensure that the property complies with all the applicable property laws. One such law is the tenant’s right to safe and habitable space.
Therefore, before you put the property on the market, you are to thoroughly inspect the property for any possible issues.
To avoid any legal disputes, we recommend that you hire an experienced home inspector. They will do a thorough inspection of the sub-structure, the fittings, the fixtures and the appliances on the property.
The home inspector’s report will contain a list of the repairs that you must carry out to ensure that the property meets safety and habitability standards.
Renter Ready
You need to make sure that your property is renter-ready.
This means that the home is in proper condition and ready for the tenant to move in.
It can also mean ensuring that your property has the amenities that your target market is looking for. For instance, if your most active tenant pool is students from the nearby university, they may be looking for a home that is aesthetic and that has Wi-Fi and a bike rack, if that’s their mode of transportation.
If you are out of touch with tenant demands and needs, it might be ideal for you to engage a reputable and experienced property management company to recommend to you the necessary property renovations.
Taxes
No matter what you do, you can’t avoid taxes.
Take a masterclass in property taxes and know how much you are expected to pay. Taxes vary from State to State.
In your calculations, consider the following:
- Depreciation of the property
- Mortgage repayments
- Property management and maintenance costs
- Insurance payments
These, and more, are tax deductibles that you can take advantage of to reduce your taxable income.
Conclusion
The key to enjoying the full benefits and advantages of property leasing lies in the management of the property. You want to ensure that the property is in the best condition possible, that the rental is in compliance with property laws, and that your tenants’ needs are met.
A landlord might need to put in a considerable number of hours to do so. To ease the burden on your shoulders, rely on the experienced team at Easy Bay Property Management. We are a full-service provider with a full range of management solutions. Our team is professional, well-experienced, and diligent in service.
Our range of services has increased over the years to meet the increasing demand from our clients. We offer tenant screening, property advertising, rental collection, property maintenance, and more.
So, if you have a property in Pleasonton, Livermore or elsewhere in California, get in touch with us and you will receive a free quote for our management solutions.
