There are a lot of good reasons someone might want to turn their home into a rental property. Maybe you’re moving but want to keep the home to generate extra income. Maybe you’ve inherited a second home that you won’t be using full time, so why not rent it out as passive cash flow? Or maybe you are looking into buying a home for the sole reason of renting it out.
Whatever your situation, it’s important to understand what all you need to do to turn your home into a functioning rental property that can generate extra income. Before diving in, there are some crucial steps to take to ensure that you will find success in the rental home business.
Here’s how to make it happen!
Look into proper insurance
Your basic homeowner’s insurance won’t be enough when you are looking at turning your home into a full-time rental property. It makes sense… anytime you have people on your property (especially living there) you accept some degree of responsibility for their safety. When it comes down to it, having good insurance in case of emergency can be a total life saver.
When you own a rental property, you’re going to want to purchase landlord insurance. This type of insurance is specific to rental property owners and combines the aspects of homeowners and liability insurance for emergency situations.
The property insurance portion covers any type of property issues such as a fence getting blown down or a tree falling onto the home and causing damage. The liability insurance protects you from any type of medical bills or legal costs that might arise from a tenant.
Having any type of insurance is proactive (and required by law) but can really save you in the long run.
Get the required permits
Depending on your location, different areas can require different permits in order to own and lease out a rental property. These requirements will vary according to the city, so it’s important to check with your city hall as to what permits you need!
Though you might not agree that permits are necessary, they are actually very important when it comes to the safety of prospective tenants. Typically, an inspector will come to the house to do a proper inspection and qualify you for the right permit.
See the section below, but a property management company can really help and assist with the required inspections and permits. When your property is compliant according to your city, you’re ready to rent!
Check into hiring a property management company
A property management company basically takes all of the day-to-day responsibilities of what it looks like to manage a rental property. Tenant leasing, rent pricing, rent collection, emergency maintenance requests, and so on.
Property management companies not only make sure your rental is operating at full capacity and continuing to be a source of cash flow, but they also can help you get your property ready to rent. Management companies are familiar with the processes and can help you make sure that your property is ready to go.
Decide what repairs and renovations you want to make
When it comes to making repairs and renovations before listing your rental home for lease, everyone is different. This is where you have some freedom personally to decide what all you want to improve (or not improve) before your home goes on the rental market.
If you have cash available, it might be worth it to do a major kitchen or bathroom renovation in order to be able to increase the price of rent. If you are looking to list the home as quickly as possible to get some cash flow coming in, you might want to do a couple of small improvements and call it a day.
Owning a rental property is one of the best investments you can make and can really be a great source of passive income. It can be tough to know where to start when it comes to turning your home into a rental property, but these are the most important things we think you should consider. With that being said, time to get to work!
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