There are several things to think about before renting out your house. For some, renting out their house is the perfect way to earn passive income. Charging slightly more than the amount due generates rental income each month. But while this is an effective way to build a personal savings and earn extra cash, being a landlord involves more than sitting back and collecting a check. Here are seven things to think about before renting out your house.
1. How Much is Your Mortgage?
Of all the things to think about before renting out your house, keep your mortgage payment in mind. For this to work, the rent that you collect each month must cover the mortgage payment. Before renting out your house, research rentals in your area and compare prices. This provides clues as to how much you can get for your home.
2. Do You Have a Cash Reserve?
Even though you're no longer living in the home, you're always responsible for the repairs. This is your home - regardless of who pays the rent. For this reason, you need cash for things that pop up, such as a broken appliance, a leaky roof and routine maintenance. Plan ahead and put cash aside to keep your head above water.
3. Credit Score
Some renters may have a few credit dings, and you shouldn't expect a perfect credit history. But at the same time, you wouldn't want a renter with a horrible credit history. Include a credit check as part of the application process. With the applicant’s name and Social Security number, you can order his credit history.
4. Rental History
Do not stop with the credit check. Ask potential tenants for a list of their past landlords. This way, you can run a background check on their rental history. If the person habitually submitted late rent payments, or experienced a recent eviction, this can create problems for you. Getting rental references will help you choose the best person for the property.
5. Regular Inspections
Do not settle into a life of collecting rent payments each month. Periodically schedule appointments to inspect your house. Notify tenants in advance, and plan a few surprise visits to check the condition of your property. Ask tenants to notify you immediately if any issues arise with the property.
6. Income Taxes
Rental income is not free money. Even if you only earn one or two hundred dollars in rental income each month, you have to claim this money on your tax return. But while this money is subject to income tax, you can also deduct certain rental expenses from this income. Speak with a tax professional for information on eligible write offs.
The decision to allow pets in your home is a personal matter. Not allowing pets may limit the number of people interested in renting your home. But at the same time, pets can damage the carpet and other types of flooring. Think long and hard about whether you want pets in your home. Whatever you decide, make this clear when you interview potential tenants.
Being a landlord isn’t an easy job. And sometimes, the headache isn’t worth the income. But if you have a property that you're unable to sell, renting out the property can be a short-term solution. How do you feel? What are some advantages to renting out a house?