Tips for Transforming Your Home into a Profitable Rental Property
If you’re concerned about navigating the real estate market during the coronavirus pandemic,
consider transforming your home into a rental instead of selling it. This can be a great way to
earn some passive income while dipping your toes in the world of real estate investing. Before
you can welcome tenants, however, you will need to make some preparations. Here’s what you
need to know about converting your property into a rental!
Buying a Home During COVID-19
Of course, you will need to move out of your home before you can rent it out to tenants. Unless
you’ve already started hunting for a new house, you may be surprised to learn that the real
estate market is still going strong! Despite the pandemic, houses are in high demand, so you
will have to act fast when you find the perfect property. Ensure that you’re prepared to make an
offer by getting pre-approved for a mortgage as soon as possible.
You have several loan options for funding your new home. For example, PennyMac
recommends a conventional home loan if you don’t want to pay for mortgage insurance and you
have enough cash for a 20 percent down payment. Conventional home loans have a fixed or an
adjustable interest rate, so you can choose whatever option works best for your situation.
Making Home Upgrades
You’ve bought a new house, moved all of your belongings, and you’re ready to rent out your old
property. Now is the time to make some repairs! Ensure everything on the property is working
as it should, including your appliances, electrical systems, and plumbing. If the carpets are
looking a little dilapidated, tear them out and consider installing some hard flooring. You may
also want to give the walls a fresh coat of paint and do some minor upgrades in the kitchen and
bathroom. Making some inexpensive upgrades will help your property appear as attractive as
possible without completely blowing your budget.
Setting Rental Rates
Deciding on rental rates is a delicate process. Charge too much for rent and you could face high
vacancies. Charge too little, on the other hand, and you’ll hurt your bottom line. Hitting that
sweet spot in between will require some research! According to RentPrep, most landlords
charge between 0.8 and 1.1 percent of the home’s value for monthly rent. This can help you
arrive at a realistic range for your own rates, but it’s important to compare your rental to other
listings in your neighborhood as well. Check out local rentals that are similar to yours and find
out what they’re charging to get a better idea of the fair market rent in your area.
Create a Rental Agreement
As NOLO explains, writing a lease or rental agreement is important for setting the rules of the
tenancy that both you and your tenants must follow. For example, your lease will detail the cost
of rent, when it is due, the term of the tenancy, and how much notice must be given before your
tenant moves out. Some other important things to write in your lease include the pet policy,
security deposit amount, repair policies, and any other rules you would like to enforce, such as
bans on smoking or illegal activity. If your property has a yard, now is the time to decide who will
be responsible for yard maintenance so you can include this information in your lease as well.
Turning your home into a rental is an excellent way to get into real estate. You’ve already done
the hard part of finding and purchasing a property. Now you just have to make a few upgrades,
decide on rental rates, and put together a lease agreement. If you do your job right, you should
have no problem finding great tenants!