What you Should Know Before Renting out your Home

Renting out your Home

Real estate investments are a great way to diversify your portfolio. However, purchasing rental properties is beyond the budget for many people. What if there was a way to make money without the expense of a second property? Nowadays, you can make extra income by renting out your home. Some homeowners choose to rent out their entire home and downsize to simpler accommodations. Another option is renting out single rooms in your home and hosting guests through sites like Airbnb and Flipkey. Before listing your property, here are some important considerations about renting out your home.

Know the Market Demands

The first thing to consider is your home’s rental appeal. Just because you have the space doesn’t automatically mean people will want to pay for it. It’s important to know the real estate demands in your location to determine if renting out your home will be profitable in the long run. If the demand is low, it will be difficult to find renters.

The second consideration should be curb appeal. A little research will give you a better idea of what features are appealing to potential tenants. Compare your property to others in the neighborhood to see if your home would be an attractive option. You will need to complete all home repairs and should consider other small updates that can add value to your home. First impressions are lasting, so be sure that your home is memorable for all the right reasons.

The Finances of Renting out your Home

Your first financial question will be how much to charge your renters. Knowing the local real estate market will give you a clearer idea of rates. You can start by comparing your property to similar homes in your neighborhood. Be sure to set a price that will cover any additional expenses and keep you in the black each month.

The whole point of renting out your home is to bring in more income. However, any savvy investor will tell you that you must spend money to make money. Transforming your home into a rental property takes time, investment, and attention to detail. Home repairs and property management can be both pricey and unexpected. Before listing your property, assess how much work and the approximate costs of what needs to be done.

If you decide your home is ready for the real estate market, the next step is to get the word out. The advertising strategy depends on whether you are renting a single room, an entire property, or looking for long-term renters. Rental sites offer a wide range of options in accommodations and let you have a look at the competition in your area. Some  websites require a membership fee while others take a percentage after booking. Many homeowners choose to hire a professional property management company to handle the advertising and daily details. Choose the best option that keeps you under budget. The last thing you want is to drive yourself into debt before you begin.

The Legal Aspects of Renting your Home

Before you take the plunge into the real estate market, you should also consider the legal aspects of renting out your home. Each state has specific laws regulating rental properties and reporting of additional earned income. It’s wise to contact the City Housing Administration and a Certified Public Accountant to ensure you are complying with all state and federal laws.

You should also familiarize yourself with the Residential Tenancy Act so you understand both the property owner’s obligations and tenants’ rights. Draw up a rental agreement that outlines the rules, security deposits, rent collection, repairs, fines, terminations, and agreement to inspection. There are lease templates available online, but it’s smart to consult with a lawyer.

Notify your insurance company as well to update your policy and make sure the property is covered. Gaps in the coverage could leave you vulnerable in case of an accident. Knowledge and full compliance with the laws will keep you and your investments safe against severe fines or legal claims.

Taking the Leap

There are a lot of financial, legal and personal considerations when you decide to rent out your home. It is not something that should be taken lightly. Learn what it takes to manage an investment property and turn a profit. If your pro list outweighs the cons, then it’s time to get out there and start making money by renting out your home!

 

Renting out your Home

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Homebuyer Regrets: 5 Reasons Millennials Wish They Hadn’t Bought a Home

homebuyer regrets

There are a lot of reasons why you might have homebuyer regrets. Although owning a home is one of the hallmarks of success for the middle class, it’s not without its problems. Millennials, in particular, have discovered that their financial situation is shaky. As a result, more than half of millennial home owners have homebuyer regrets. Here are five key reasons:

1. The Great Recession

Research indicates that millennials are considerably more likely to have homebuyer regrets than their Baby Boomer counterparts. The younger Gen Z has plans to buy homes young. So what’s going on with millennials? The great recession is likely a huge part of the problem.

This generation was already working, but not very far along in their careers, when The Great Recession struck. As a result, they were financially hit hard. If they’d already bought a home, they likely have found themselves struggling to make mortgage payments. The rest of their financial lives has just been too precarious.

2. They Didn’t Pay Enough Down

More than two thirds of millennials paid less than 20% for the down payment on their homes. This means two things:

  • They still owe a lot of money on their home mortgages.
  • Their mortgage payments are higher than if they’d paid more down.

Both of these things have led to some big homebuyer regrets.

3. They Didn’t Plan for So Many Ongoing Home Costs

Buying a home is just the first step of the home ownership process. You also have to keep your home maintained, which costs money. You might need renovations. Additionally, you may have to use your homeowner’s insurance, which can lead to greater rates there over time. Many millennials seem to have failed to plan for these costs.

“Millennials are planning 49% more renovations than Baby Boomers over the next five years, but they’re also three times as likely to use a personal loan and twice as likely to use a credit card to finance their renovations than Baby Boomers.”

Almost half of them were surprised at the cost of maintaining their homes. And they were four times as likely as Baby Boomers to use their homeowner’s insurance in the past year. So, they are spending more money on maintaining and renovating their homes. Yet they don’t actually have that money, which means that they’re paying high interest rates on loans to cover those costs. It’s overwhelming.

4. Overall, Their Mortgages Are Too High

More than anything else, millennial homeowners resent how much money they pay towards their mortgages. Maybe they aren’t earning enough as they still try to recover from The Great Recession. Perhaps they have too many other costs in their lives, including children and exorbitant student loans. Maybe the choices they’ve made with down payments, mortgage companies, and refinancing have left them struggling financially. Whatever the reason, the number one cause of homebuyer regrets among millennials is the high cost of their mortgage.

5. They’re Still New to Home Ownership

More than 60% of millennials have only owned their homes for five years or less. Those first years are hard. You’re adjusting to paying a mortgage. You’re learning all that it takes to pay for and maintain a home. You may not be used to the higher energy bills and property taxes as compared to when you were renting. Perhaps, as time goes on, these same millennials will have fewer homebuyer regrets because they’ll have adjusted to what it means to own their homes.

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