It is common for a landlord to move out of a home they once lived in and want to rent that home out to a tenant. In fact, this is how your rental empire could get its start with its first investment property, and who would blame you for seizing such a lucrative opportunity? You have purchased a new home, so it is only natural to want to make money on the preexisting home where you once lived. However, to make this happen, you must understand a few key things about renting out homes; otherwise, this could turn into more of a nightmare than a financial win for you. The following are a few tips to help you pull this off without a lot of problems bogging you down along the way.
Preparing the Home for a Renter
It is important, before ever thinking about renting your former place of residence, to do a thorough inspection of the home. You will want to make sure you have a good grasp of what needs to be fixed in the home, and you also want to take note of any recurring problems with the home: plumbing, gutters or other issues that may give you problems down the road with a renter. Fixing as many of these issues as you can, ahead of time, can go a long way to preventing problems with the renter who moves into the residents. Also, if you know that the septic system, for example, must be cleaned out on a regular basis, then you can plan for this expense. The last thing you want as a landlord is a lot of surprises that pop up on you that you were not completely aware of beforehand. These expenses are important numbers to help you calculate how much it will cost you to rent this home each year on average and what you can expect to bring in as profit when all is said and done.
You do not want to simply rent your home out to just anyone for any reason. While certain laws apply to protect renters, it is important to understand that you have certain rights as a landlord too. The person you rent to can be required to meet specific income requirements, possess a clean credit report, be able to show a good rental history and other factors that would ensure they are going to be a decent renter. You can even charge an application fee and use that money to perform a level two background check. However, it is always a smart idea to speak with an attorney about how to best approach such matters to make sure you are not crossing any legal lines you should not be crossing in the process of trying to get a good renter into your investment property.
Developing a Rental Contract With Teeth
If you have never rented out a home before, then you will want to be careful to not draft a weak rental contract. A weak rental contract will let the renter off the hook for a lot of expenses that are really their fault for existing and that they should feel obligated to pay. They may damage the property in some way. This could be anything from a renter messing up the home with filthy pets that destroy the carpeting to starting a fire that does structural damage to the home. A lot of renters will want to skip out after these sorts of things happen, sticking you with the bill for the damage they have caused to your rental property. Having a properly drafted rental contract is essential to putting the squeeze on this kind of irresponsible renter. Especially when renting to younger tenants, for example, having a parent cosign for them can give you more legal avenues to pursue when it comes to holding a renter responsible financially or legally speaking. A savvy real estate attorney should be able to help you craft a rental contract that has the right kind of teeth to allow you to put the heat on a renter who damages your property and then tries to bail.
Using a Management Company
As you become more involved in expanding your rental empire, the last thing you want is to waste a bunch of time babysitting your already profitable rentals. Turning this job over to On Q Property Management will free you up to have more time to scout and purchase other properties to add to your portfolio. The property management company can take on the oversight of your properties, collect rent, handle maintenance issues and make sure your tenants are living up to their end of the rental agreement they signed. Sure, a competent Phoenix property management company providing oversight for your rental properties may be an added expense, but it is worth it to give you the peace of mind you need to focus on other important aspects of your growing rental-based business model.