4 Helpful Tips for Making Your Home a Long-Term Rental

4 Helpful Tips for Making Your Home a Long-Term Rental

  • Luci Edwards
  • 05/17/22

When you’re ready to move, selling your home isn’t always the best option. There's a lot to know if you’re aiming to convert your home to a long-term rental—especially given the unpredictability of the COVID-19 housing market. If becoming a landlord is in your future, you’ll need these tips to get your home ready for rental.

Think Ahead to Your New Home

Renting your current home while purchasing a new property is doable, but it takes some planning. For example, you’ll need to shop around for interest rates and the best type of loan for your second home.

Many mortgage programs are available, but a conventional loan remains a popular choice. Contrary to popular belief, conventional loans are pretty flexible—you have a range of down payment options and interest rates that are fixed or adjustable.

Before you begin your home search, you’ll also need to calculate how much you can afford. In some cases, the potential rental income can affect whether you’ll qualify for a new home loan. Speaking to your lender—and reading the fine print thoroughly—can help you make the right financial decision regarding your second (or subsequent) mortgage.

Have a Plan for COVID-19 Challenges

Although many homes are still selling (and renting) during the coronavirus, the market impacts are unpredictable. Given this uncertainty, it pays to have a plan in place for your rental.

For example, many eviction processes are limited or prohibited during the pandemic due to renter relief programs. As a landlord, you must have a plan to pay the mortgage if your tenant misses payments.

And while there are mortgage relief programs for homeowners, taking advantage of these can impact your chances of securing a new home with a second mortgage. Having a clear budget—including landlord expenses—can help you remain financially solvent during (and after) the pandemic.

Decide How to Place (and Manage) Tenants

As the homeowner, you can decide to rent the property independently. But being a landlord involves many responsibilities, including providing for the safety of your tenants. You’ll also need to screen and place tenants, collect payments, and make any necessary repairs. Per Legal Zoom, you must keep the home “habitable” for renters, covering everything from keeping the heat and AC on to removing pests.

An alternative is to hire a property manager or a company to handle your rental. A property manager can run background checks on prospective tenants, show the property, and arrange for services as necessary.

Homeowners who want less responsibility and more freedom tend to highlight the advantages of hiring a property manager. Of course, there are fees involved and less control over the day-to-day management of the home. The tradeoff is favorable for many property owners, but you’ll need to decide what’s right for you and your budget.

Decide What to Include with (and How to Set) the Rent

As the property owner, you’ll need to decide what to include in the rent, from utilities and on-site services to furniture. Many rental properties charge a flat rate that combines monthly rent, sewer fees, water bills, and trash pickups. Others require the tenant to set up their services, though this might lack services to the property.

Plus, there are cost differences between offering a furnished versus unfurnished rental. You’ll also need to crunch numbers to ensure your asking price is fair in the current market. Consider property type, size, location, and condition, and compare your asking price with nearby rentals. After all, offering tenants a fair deal is just as important as breaking even or making a profit on your landlord ventures.

Becoming a landlord isn’t for everyone, but it’s a viable option if you plan to buy a second home. From comparing mortgage rates to finding a property manager, working toward setting up your rental takes effort. But taking the proper steps to prepare can mean a financially rewarding payoff in your future.

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