Are you thinking about turning your home into a long-term rental property? While there are obvious benefits to selling your home, there are also benefits to renting it out. Not only do you have the chance to bring in additional income each month and grow your investment portfolio, but renting out your primary residence typically means that you can keep the lower interest rates in place, as opposed to the higher interest rates that come with purchasing an investment property.
With that said, it’s important to know what you’re getting into and to approach it the right way so you can be successful as a landlord. Read on to learn more about converting your home into a long-term rental, along with special considerations in light of the coronavirus pandemic.
Make Sure You Want to Be a Landlord
First of all, do you really want to be a landlord? There is a lot of responsibility involved. Particularly if it’s your first time, you might be handling much of the responsibilities yourself, and it can get overwhelming if you’re not committed or well-prepared. The benefits are real. Just be sure that you’re up for the management tasks involved (e.g., making repairs, keeping the property maintained, dealing with tenant complaints, etc.) and that it won’t put you in a precarious financial position.
If you can budget for it, Rentec Direct suggests hiring a property manager. It’s an investment, but it can save you a lot of time, energy, money, and stress in the long run.
Look into Cash-Out Refinancing
You will likely need to make some changes to your home before renting it out, which we will discuss below. If those changes include remodeling or other types of major improvements, and you need a way to cover the costs, one option is cash-out refinancing. Lenders like PennyMac replace your existing mortgage loan with a new, larger one. Then, the difference between the two loans is given to you in cash. You can then use that cash to pay for home improvements.
Another thing to consider is that the coronavirus has caused interest rates to drop significantly. Therefore, now could be the perfect time to refinance.
Make Essential Repairs
One type of improvement that you will probably have to make is essential repairs. This includes any big or small projects that will ensure the safety and function of the property. For instance, if the roof has seen better days, there is an issue with the plumbing or electrical, or there’s a broken step in the entryway, those things will need to be addressed before you put your home on the rental market.
Think About Upgrades
Other than the essential repairs, you will also want to consider any ways that you can generally improve the appeal of your rental property. Do you have up-to-date appliances? Do you need to repaint any areas of the home or replace the flooring? Perhaps a kitchen and/or bathroom remodel could help you draw tenants. Evaluate the overall aesthetic and function of the property, and determine what changes are worth making.
Consider the Coronavirus Pandemic
Lastly, there are a few considerations that need to be made during the pandemic. You will need to make sure your property is thoroughly cleaned and disinfected before tenants visit or move in. Also, utilize virtual tours, video chat, virtual open house events, and other technological means of showing your home and interviewing potential tenants to reduce the risks of spreading the virus.
Moreover, a lot of tenants are having trouble making ends meet right now, which as CNBC points out, could present problems with rent payments. Nonetheless, as long as you understand the risks and come up with a plan for how to work with tenants in such a situation, you shouldn’t let that prevent you from renting out your home.
Turning your home into a long-term rental is a great way to boost your income and investment portfolio. Just be sure to consider all the factors involved (both general and coronavirus-specific) to make sure it’s right for you. In no time, you could be renting out your home and raking in the cash!
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Peter has written for his local magazines, Country Zest & Style and Middleburg Life as their Wine contributor. He also enjoys writing blogs on interesting and pertinent real estate matters, so please follow!