Whether your company is moving you to a new town or you are in the military and making a permanent change of station, the idea of renting out your home might seem like a good idea, but there are a few caveats you should be aware of. As long as you know how to mitigate the risks, renting out your home can still be a good way to bring in extra money, enjoy a few tax breaks, and let you enjoy the appreciation of your home over time. Here are three very important things you should know before you allow the first tenant to move in.
1. Understand the Costs Involved
Renting out your home makes you responsible for the cost of all repairs. This means if the hot water heater goes out, you must have enough money to cover the cost of the repair. The same applies to every facet of your home, including any damage done by tenants. You will need to look closely at rental rates in your area to ensure yours is not so high that no one will rent it or so low that you could end up with undesirable tenants. You may want to consider hiring a professional and respected property management company to help protect your investment.
2. Get to Know Your Tenants
While you might not want to be on “invite them over for dinner’ terms with your tenants, you should get to know them on a more professional level. Run background checks, pull their credit report, and screen them thoroughly before allowing them to sign a lease and move in. You should also encourage them to purchase renter’s insurance. The more you know about any prospective tenants, the more likely you are to end up with people you can trust in your home. Be sure you have rental property insurance on the home that will cover any damage your tenants may do.
3. Understand the Law
Before you rent out your home for the first time, you need to know any federal, state, and local laws pertaining to your area. You should have a professional lease drawn up that outlines your policies in writing, never rely on a handshake as this may not be legally binding. You may find that unless you have everything in writing, your tenant may have more legal rights than you do. If you have to make any amendments to the lease, these should be in writing and signed by both you and your tenants. You may also need to have the changes notarized for them to be legally binding. For your part, be sure to make any needed repairs in a timely fashion or your tenants may be able to take you to court over them. The more you know before you set out to become a landlord, the fewer problems you are likely to have.