There are many reasons you may have decided to convert your home into a rental property. Maybe you bought a new house but can’t seem to sell the old one for a fair price. Maybe you just need the extra cash. Whatever the reason, it can be hard to know where to start or what changes need to be made in order to make this happen. Here are a few steps you can take to start making this change a reality.
Check Your Mortgage
If you have a mortgage on your home and haven’t lived there for at least a year, it’s possible you’ll need to wait before converting your home. This is because there are certain benefits to taking out a loan for a primary residence versus a vacation home or investment property such as lower interest rates and smaller down payments. If you make the change sooner than 12 months, you could be committing mortgage fraud resulting in foreclosure. To prevent this, check your loan paperwork or talk to your lender to find out the exact rules in making this switch.
Look Into Insurance
Simply having homeowners insurance won’t be adequate for your new rental property. Letting other people live on your property means you’re partially liable for their safety. For example, if a tree were to fall on the home and your tenant got hurt, you would have to pay for their injuries. Or, if they were to slip and fall outside the property and blame it on your negligence and turn things into a legal headache, you would have no financial help with regular homeowners insurance.
Tax Changes
Any income you make on your new rental property will have to be taxed at the end of the year. However, there are many potential deductibles you can claim that can save you money. For example, utilities, homeowners association fees, landlord insurance policies, repairs to the house, property taxes, and mortgage interest can all be considered deductibles on your taxes. Consider speaking to a tax advisor about these and see if there are any steps needed to convert your home to a rental property in their point of view.
Repairs and Upgrades
Look at other rental properties in the area to make sure your house lives up to the competition. If they have more updated appliances, or have better amenities, it might be in your best interest to make some changes. A new coat of paint can make a big difference in making a property look new. Curb appeal also makes a big first impression, so investing in some landscaping could be a smart decision.
Find a Tenant
Now that you’ve prepared your property, it’s time to start looking for a tenant! List your property on sites such as Zillow, Craigslist, or your city’s Facebook page and get ready to start combing through applications. Look for automatic disqualifiers such as a gross monthly income lower than three times the amount of rent or no steady job of at least a year. No matter how nice people may seem when you first meet them, always be sure to run a professional background and credit check. Be patient, as taking the time to find a good tenant will save you a lot of time and money in the long run.