Should You Rent Your Home?
The thought has probably crossed your mind: if you found the job of a lifetime in another state or your current company transferred you, should you sell or rent your home? Naturally there are many factors to weigh before making such an important decision.
First, you need to think about your reasons for keeping ownership of the home. Do you like the home so much that you want to hold on to it in case you ever move back? Are you looking for an extra tax break through property depreciation? Do you want to use the home as a basis for retirement investment? Is the property in a portfolio of investments or part of a 1031 Exchange?
These are all fine reasons for retaining ownership, but there are factors to consider that may outweigh the perceived benefits. For instance, are you prepared to be a long-distance landlord, hiring someone to maintain and manage the property for you? There are many other costs involved as well, such as advertising costs, turning costs (cleaning and painting between tenants), property taxes and insurance, utilities paid when your property is between tenants, and accounting costs. In order to assess these costs, you should research the numbers in your market. Expenses often run 30 to 40 percent of income before the monthly mortgage cost. I always advise my clients to speak with their accountant and legal counsel before making a decision.
The ABCs of Property Rental
If you’ve decided to rent out your home, where do you start? First, get the house in shape in order to get the highest reasonable rent. This includes interior and exterior patching and painting, carpet cleaning or replacement, appliance tune-up and cleaning, adequate insulation to cut down on utility bills, and fixing whatever needs fixing. Take photos of the home PRIOR to tenants moving in.
Then, set the the proper rent. Location rules when setting prices. You can contact a property management company to research prices in your area, or you can look online to get an idea. If you set your price too high, it’s unlikely that you’ll find a tenant. If you ask for too low a rent, prospective tenants will wonder what’s wrong with the place.
Should You Hire a Property Management Company?
It’s not absolutely essential to hire a property manager, but it can make your life a little easier, especially if you are moving out of the area. Interview at least three different companies, and be sure to ask about accreditation, experience, customer service, references, tenant screening, vacancy rates, maintenance, monthly reporting, eviction handling, insurance, fee structure, property inspection, and any special services they offer.