Are you one of the many people around the country looking to take advantage of low interest rates? Maybe you’re considering purchasing your first investment property, or perhaps you’re ready to buy your dream home and are wondering if it makes more sense to rent out your existing home rather than sell it. There are a number of reasons why you may want to rent out your home. Here are some questions you may want to ask yourself before you dive headfirst into landlordship.
Does renting out your property make financial sense?
Since many of the reasons people consider renting out their homes revolve around money, one of your first considerations should be if it makes financial sense. Do some research to find out what the rental market is like in your area. Will the rent you can reasonably charge cover the existing mortgage payments? As with any investment, it may be beneficial to consult a financial advisor and tax professional before making a decision.
Is your home in good condition to rent?
If you decide to rent out your property, consider any repairs or updates that need to be made. Just as making improvements can affect a home’s value before sale, they may have an impact on what you can charge for rent or how quickly it gets rented, especially if you are in a competitive rental market.
How will it be managed?
Are you prepared to receive calls from your tenants in the middle of the night or to make house calls or coordinate repairs for plumbing and HVAC issues? Or can you afford to pay a property manager to take care of these issues? There are a lot of pros and cons to consider when making this decision. Other factors may come into play as well, like your physical proximity to the property. Do your research to determine what makes sense for your situation.
What laws apply to landlords?
There are a number of federal, state and local laws that may impact your decision to rent out your home. For instance, at a minimum you’ll have to comply with the Fair Housing Act and Fair Credit Reporting Act. If you live in a townhome, condo or other planned community with an HOA, there may be regulations that limit the number of rental properties allowed in the community. Understanding property, tax and nondiscrimination laws at the outset may help you avoid related legal troubles down the road. Consult an attorney to make sure you understand your legal responsibilities as a landlord.
What kind of insurance do you need?
Your decision to rent out your property may have an impact on your homeowners insurance, especially if you will no longer be occupying the home. Better to look into this sooner than later, rather than risk having a future claim denied. Talk to the provider of your current homeowners insurance policy about your options to understand how your coverage (and premiums) may change.
How will you find tenants?
If you make the decision to become a landlord, you will need to find renters. After all, you’re still on the hook for your mortgage payment, even if the property is sitting empty. Think about how you’ll find tenants – will you advertise or rely on word-of-mouth? Will you conduct background checks? Again, be sure you understand the nondiscrimination laws as they apply not only to screening applicants, but to advertising your rental as well. If you have any doubts or concerns, consult an attorney.
Need help financing your investment property? Contact a Castle & Cooke Mortgage loan officer today!
Castle & Cooke Mortgage, LLC® (NMLS #1251) is a leading independent mortgage lender headquartered in Salt Lake City, Utah, with locations across the United States.