Many people buy a home and then have to move. Whether it’s an upgrade, a new job, or some other motivation, you have to decide what to do with your current house.
Many people choose to sell their home and move on. However, a move is a great time to become a landlord as well. If you keep your current house and rent it out, you can make extra income while continuing to build equity.
When is this a good idea? Discover the things you need to consider below.
Why Rent Your Home?
Why would you want to rent rather than sell your home when you move?
Sometimes, you have to move suddenly and you don’t have the equity built up to make a good profit. You might be facing a major mortgage prepayment penalty if you move in the first couple years of owning your home.
Other times, you might owe more on the home than it’s worth. Or, you might think that your relocation is temporary and you’ll have a reason to come back in a few years. Finally, you might be concerned that the market isn’t strong in your area and you can make a better profit if you sell later.
Of course, one great reason to rent your house is to become a real estate investor without most of the risk and costs that many investors face.
Become a Real Estate Investor — Easily!
You might think that being a real estate investor means that you need to start buying, renovating, and flipping homes. Or, you might think the industry is a bunch of get-rich-quick seminars making big promises and taking advantage of the gullible.
In reality, investing in real estate isn’t either of these things. It simply means you own a property and make money from it. Renting out your existing home when you’re ready to move is a great way to get started in real estate investing without having to get significantly outside your comfort zone.
You don’t need tens of thousands of dollars to begin, and you don’t have to vet a possible money pit. Just use the house you already know and love, and rent it out.
Find the Right Tenants
Don’t think that the real work starts once you get tenants. In truth, the real work is getting tenants. Having the right renters will make the difference between a great investment experience and a significant struggle.
Make sure that everyone over the age of 18 who will be living in your house fills out the rental application completely. You should also get permission to check credit, contact the current employer, and reach out to previous landlords. If they don’t agree, move on.
From there, work with a lawyer to get an airtight lease agreement. Don’t miss key clauses like limits on the number of people in the home, and be sure you take your own photos of the property pre-lease.
Don’t let the rigor of the process scare you — while there are bad apples, there are also millions of renters who are great families or individuals.
Determine Property Management
If you still plan to live relatively near your old home, you may consider managing the property yourself. If you will be moving out of state, however, it might be helpful to have a property manager take over.
Here are common tasks related to property management:
- Advertise for new tenants
- Sign leases and collect rent
- Keep track of finances
- Schedule maintenance and repairs
- Issue legal notices and file evictions (you pay legal fees)
If this doesn’t sound like something you’re up for, carefully vet a property manager. It will cost a percentage of your rental income, but managing a property badly will cost you far more.
Set Rent and Deposit
How much can you rent your home for? This is based on the rental market in your area, so call around to other properties for rent. Pose as a potential tenant in order to find out how similar the property is to yours, and how much they’re charging in rent and deposit.
Make sure you’re aware of the laws in your area regarding fair rents and deposit amounts. Many places charge one month’s rent as the deposit. Think about whether you want additional deposits for pets as well.
Once you have the deposit, set it aside in a separate account and return it to the tenant, minus repairs, when they move out.
Buy Your New Home With a Professional
Once you’ve decided to rent your current home, you’ll need a new place to live. Don’t skip working with a professional who can help you find a home you’ll love. A Clever Partner Agent can help. These professional local agents will give you a full-service buying experience, and you may even qualify for a rebate.
Ready to rent? There’s no easier way to get started in real estate investing.