Selling your home isn’t the only option you have when you’re moving elsewhere. You have the potentially lucrative option of renting it out. This can provide you many of benefits. Including:
- Earning a regular rental income.
- Holding onto your property as it increases in value.
- Taking advantage of certain tax deductions.
But being a landlord might not be the easiest task. If you wish to convert your home into a rental property, then the following are some tips we at Limestone Country Properties have put together to help you along the way.
Understand the Work
Being a landlord is no easy work. It requires a lot of time, persistence, and hard work. Among other things, you’ll need to know how to do the following.
- Market the property to find new tenants.
- Screen prospective tenants.
- Collect rent.
- Respond to maintenance calls.
- Deal with tenant complaints.
If you don’t have the experience in handling these tasks, you may have to hire expert help. A good property manager will help you to not only manage the property on your behalf, but also to maximize your ROI.
Talk with your Mortgage Provider
Of course, you’ll need a new house once you move out of your present one. But before doing so, talk with your mortgage company to know whether you’re qualified for another loan.
Your mortgage lender may account for the extra passive income you’ll be getting from the second property. The opposite may also be true, though. But, whichever way, know whether you’re qualified for another mortgage.
Invest in a Landlord’s Insurance Policy
Renting out a property comes with risks, and so you’ll need protection against these risks from a legal perspective. This is where a landlord’s insurance policy comes in. It’ll provide more coverage than a homeowner’s insurance policy.
The following are some of the things that a standard landlord’s insurance policy provides cover for.
- Loss of rent arising from things like habitability issues.
- Damage resulting from fire, hail, or lightning.
- Legal fees arising from settling disputes with your tenant.
- Structural damages that may occur to your property.
- Damage to maintenance equipment that you own.
- Minor injuries and accidents that may occur while you’re at the property.
As a general rule, you can expect to pay about 15% more for landlord’s insurance than a standard homeowner’s policy.
Inspect your Property Thoroughly
You must make sure that your property is in tiptop shape to ensure its ready to rent. The Texas warranty of habitability requires landlords to provide a property that meets the basic habitability codes.
In Texas, landlords have an obligation to repair any condition that impact’s a tenant’s health or safety. The only exception to this is if the tenant or their guests are responsible for the damage through careless behavior.
All repairs must be done within 7 days after being notified, or 3 days if the issue involves heat, air conditioning, or drinking water.
Get the Home Ready
Once you’ve fixed the basic issues, spruce it up to make it attractive to prospective tenants. The following are some tips to help you in this regard.
- Repaint tired looking walls.
- Upgrade the kitchen and bathroom.
- Replace inefficient appliances with new ones.
- Give the home a thorough cleaning.
- Replace leaking faucets.
- Ensure the curb appeal is high
Set the Right Rental Price
You can now set the rental price at this stage. It goes without saying that it should neither be too high, or too low. While setting the rental price may appear simple, it actually requires a lot of research. This is especially true for first-time landlords.
You can set the right prices by doing a comparative market survey. Go to sites like Zillow and HotPads.com and see how much comparative properties are charging for rent.
Another way you can determine the rental price is by using the 1% Rule. According to the 1% Rule, the right rent to charge tenants should fall between 0.8% and 1.1% of a home’s value. If a home is valued at, say, $200,000, then the rent to charge should fall between $1,600 and $2,200.
The other option is to simply hire expert help. A good property manager will have a proper understanding of the local rental market and will help you set the best rental price.
Draft a Foolproof Lease Agreement
Your Texas tenant might take advantage if you don’t mention your expectations. For instance, they might do major changes to the unit without your permission. Since there were no rules to that effect, there would be nothing much you’d be able to do.
When drafting the lease agreement, there are certain things that you’ll want it to include. Such as:
- Rent details: when, where, and how it should be paid. You may also mention any late fees (if any).
- Responsibilities in regard to maintenance.
- Rules on property changes.
- Rules on subletting, smoking, and pets.
- The length of the lease.
Hire a Property Manager
A property manager can help you handle all the responsibilities that come with being a landlord. From marketing the property or screening prospective tenants, to collecting rent and inspecting the unit.
While it may mean an additional expense for you, a good property manager will be worth their weight in gold.
Bottom Line
Converting your Texas home into a rental property can be a great financial move. But being a landlord is a challenging job. It’s no wonder savvy property owners choose to hire professional property managers.
Limestone Country Properties can help you with all your property management needs. We specialize in managing rental properties in New Braunfels and the surrounding areas. Get in touch to learn more!
