4 Factors to Consider Before Renting Out Your Home
Have you been considering renting out your whole house, a suite, or a smaller home on your property? Before you make that leap, there are a host of pros and cons to consider. Becoming a landlord is like taking on a new job, and you need to prepare yourself for all of the complexities that job entails. What factors should you consider before renting out your home?
1. Being a Landlord Takes Time
Being a landlord is not as simple as putting a down payment on a home, making monthly payments, and watching the rent roll in. You know that, but do you have a sense of the actual time it will take for you to complete all of your landlord duties? For example, are you ready to get out of bed on the weekend to deal a pipe that is broken in your tenant's home? Before you take on landlord duties, make sure that you love and have time for this kind of work and that you are easily able to take on the extra hours involved in being a good landlord.
2. You May Need to Hire Out
When you are considering taking on a landlord role, think about your specific competencies. What can you handle on your own, and where do you struggle? For example, you might be able to save a lot of money by working out minor plumbing and landscaping issues yourself, but you might have a hard time advertising your property or running background checks on tenants. By thinking ahead and being smart about what is actually involved in renting, you can save yourself lots of trouble in the long run. As you consider renting out your home, think about the amount of money you might have to spend hiring people to do the jobs that are not easy for you, and work this into your financial planning for your rental property.
3. Consider Your Investment and Your Returns
Unfortunately, being a landlord is not a license to print money. It is a job, but unlike other jobs, you could actually lose money by being a landlord. As you look at renting out a property, consider the finances behind your choice:
- How much is the typical rent for a home in your area?
- What kind of mortgage will you have on the home?
- What other fees such as taxes do you need to pay annually or monthly?
- How much money will you put aside for improvements and repairs?
- Do you need to hire people to do any of the home maintenance or management?
- What kind of backup fund do you need in case your tenants leave unexpectedly?
If you discover that you will only be making a few hundred dollars after expenses every month, you need to decide if that is worthwhile right now and in the long term. Being a landlord is a long term financial game; after many years, your mortgage will be paid off and you will own the property outright and make a lot more per month. Are you willing to put in the time now for that investment to pay off later?
4. Being a Landlord is About People
Some people buy properties or decide to manage properties because they like the idea of property management. They simply love homes and want to care for them and tinker with them. In reality, homes have people in them, and people can be complicated. Forbes notes: "Some tenants can be difficult, and in most states, tenants have legal rights that level the playing field in disputes."
Are you ready to screen tenants, treat your tenants right, be firm about boundaries when necessary, and take legal action if you must? If so, you are ready to manage some of the social aspects of being a landlord, in all of its messy glory. Make sure that you go into the landlord-tenant relationship with a realization that you could have easy tenants and that you will likely have some tenants who are difficult.
Who would rent my house, and how should I go about renting it? As you consider renting out your home, make sure that you think about the pros and cons of becoming a landlord. Are you curious about housing options and the market in your area? Visit the blog at Open For Homes and learn more about housing trends.