There are many reasons why people decide to rent out their homes instead of selling them. One relates to the personal situation of the home owner. If a home owner leave town for a job or school and plan to return to the area, they will often opt to rent their homes. Other reasons relate to the real estate market. For example, during times of extremely reduced home market values, home owners may want to hang on to their property until the market rises along with their home values. Current mortgage rates are attractively low for buyers looking to purchase a primary residence, but banks have tightened up the criteria for obtaining home loans. Renters who want to buy homes in this attractive real estate market cannot because of newly implemented restrictions. This situation results in a large supply of renters causing rental prices to increase.
Top Five Considerations For Home Owners Renting Their Residences For The First Time:
There are many important things to consider before turning a large, valuable asset over to an almost complete stranger for the first time. Sadly, failing to pay attention to some details could cost home owners a lot of time and money. Here are five important elements to consider.
#1 Set high standards for potential tenants. Currently, landlords can be really picky about who they allow to rent their homes because the market is flooded with a large supply of renters from which to choose. Landlords need to ask for rental references and actually check them out for accuracy. Because of the economy, many people have suffered financially leaving credit scores lackluster. However, home owners must use their judgment to decide whether the potential tenant just went through a rough patch or is chronically delinquent. Landlords should avoid at all costs tenants who have damaged others’ property in the past.
#2 Learn how to set a realistic rental price. This is not the time for modesty when setting the asking price of rental property. Landlords consider the market rate for comparable rental properties in their local areas along with their monthly mortgage on the property. They also take into consideration projected expenses for property repairs and maintenance. In today’s market, most landlords can recoup enough money from a rental property to cover the monthly mortgage payments on the property. This was not the case during the bursting of the housing bubble a few years back.
#3 Properly insure your property. Whether the home owner has an older home or a new construction place, they must consider the proper insurance to protect the home’s component systems and appliances. Repairing or replacing a home’s damaged components and appliances is costly. Not repairing or replacing them quickly leads to angry tenants and potential law suits for violating contracted lease agreements. Home owners want to mitigate their financial risk as much as possible through the proper insurance. Landlords need to ensure that they still meet their home owner insurance criteria after moving out and handing the place over to tenants. Home protection plans safeguard items not covered by standard home insurance. These plans offer home owners repair or replacement services for appliances and other residential systems for a monthly fee on a year’s service contract.
#4 Craft a tight lease. Potential landlords must remember that many times if something is not in the lease, then it is not legally binding. The home owner’s job is to make sure that their interests are legally protected when renting their homes to strangers. Many landlords start with a general lease template that applies to their specific state’s landlord laws, and they then add special provisions that they believe appropriate. Wise home owners will have a trusted lawyer review the lease before all parties sign the document to ensure that it meets all the needs of the landlord.
#5 Consider a Property Manager. Although a property manager charges a finder’s fee and a monthly ten percent commission on property rents, it is often much easier to deal with tenants via a professional management company. Home owners should choose a property manager with experience, determination, and integrity. The National Association of Professional Property Managers helps future landlords find reputable, local property managers.
Author: Brentt Taylor has been writing finance and housing-related articles since 2008 when he started as a freelance writer. He aims to help his readers create smart financial decision. He lives with his partner and son in New York.
