Written by Susie Wilson. Check out more articles on her blog at https://happierhome.net/blog/.
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Are you planning a move and trying to figure out what to do with your current home? While selling is always an option, many homeowners are choosing to rent out their properties instead. Renting can be the right move for some, but you may be wondering if it’s the right solution for you and your property. There are a lot of pros and cons to becoming a landlord, but these are the top items you need to address before making the final decision to rent out your home, brought to you by Mary Kelly, M.B.A, M.Ed., M.A.T.
You Need to Engage the Right Services
If you plan on renting out your property, you may be thinking of managing it yourself. While that’s not an impossible undertaking, it is important that you really consider what this will mean, which includes: advertising your rental, collecting rent, taking care of maintenance issues, and dealing with all of the other details that come with owning a rental property. That’s a lot for anyone to handle on their own.
Most people opt to hire a property manager. It may seem like a con to put out extra money for fees, but with the right company, it’s much more likely to feel like a pro. Just be sure to vet the company prior to signing any contracts. Look for property management companies that are completely transparent. This way, you’ll always know how well your investment is performing and won’t be surprised by hidden fees down the road.
There are also other services you can engage in the general upkeep of your rental, from cleaning to landscaping. For instance, landscape professionals can help conceive of (and maintain) a garden design to up your rental’s curb appeal, as well as privacy, to better draw in renters.
You Can Supplement Your Income With a Rental Property
A definite pro of owning rental properties is probably something you’ve already thought about: added income. If you’re savvy about renting out your home or any other investment property, you can definitely turn a nice profit. You’ll need to do some prep work before you can actually start earning a return on your investment, like setting reasonable rental rates and advertising your property to reliable tenants.
Again, working with a property manager can help you out with those tasks, but you can also complete them on your own. How much money can you expect to make? Talk with your property manager, or use an online calculator to figure out what kind of return on investment you can expect for your home.
It’s important to run your rental property as a business from the get-go. This will entail having a business plan, choosing an appropriate operating structure, creating a brand, and registering for the right permits and licenses. For more advice and guidance getting your rental property business going, check out the ZenBusiness starter guide.
You Still Need to Cover Costs When It Comes to Maintenance
Start-up expenses and property management fees are not the only expenses you need to think about when considering a rental property. You will also need to be sure you can cover the costs of maintaining an additional home. Aside from keeping your property appealing to potential tenants and preserving your investment, proper maintenance is also legally required when you have people renting out your home.
You need to be prepared to pay for common home repairs, like broken pipes and leaky roofing. Think about setting up a savings account specifically for those rental property repairs and know how much repairs will cost so you can plan ahead and be better prepared. Insurance on your rental property can help, as well, but you will need to make sure you actually have the right kind of coverage in order to protect your rental property. Therefore, a license insurance professional should be consulted.
You Can Take Advantage of Some Rental Income Tax Breaks
Yes, you are going to need to cover maintenance costs, and you may need to pay for a property manager and other services. Renting out your home for added income can still be well worth those nominal expenses. That’s especially true when you take potential tax breaks into account. Landlords can offset many of the costs associated with maintenance, advertising, and even property management fees by deducting some of those expenses from their taxes. Unless you are well versed in tax preparation, figuring out exact deductions and amounts can be tricky. Therefore, the benefits of having your taxes professionally prepared, instead of doing them yourself, will probably far outweigh any additional costs.
The bottom line is that becoming a landlord is a good way to put some extra funds into your bank account, but you have to be smart about your investment. If you are spending too much time or money maintaining your rental, you’re less likely to see benefits or profits.
It is best to go over the pros and cons of your situation, and then consult with a professional property manager before you decide to rent out your home.