If you’re a homeowner who’s considering turning your home into an Airbnb or renting it out to long term tenants, there are a few things to know first. This changeover is a little more involved than moving your things out and handing the keys over to your new renter. Taking these four steps will make the transition smoother and will protect your money and your property.
The most important piece of business that you’ll need to take care of is increasing your insurance coverage. Once you start renting out your property, your homeowner’s policy won’t protect you in situations involving damage to your property or injury to your tenants or their guests. You should definitely get landlord insurance, which combines property and liability insurance. The property insurance covers the entire property, including the yard and fencing, while the liability insurance will cover medical costs and your legal fees in the event that you’re found liable for any injuries sustained on your property.
Next, look into the legal and municipal requirements in your market regarding renting out your property. Some states require a permit to rent your home, which usually requires a visit from an inspector to verify that your property is up to code. The cost of a permit is typically a nominal fee, so if your area requires a permit, it won’t set you back that far to get one.
When it comes to maximizing the rent that you can charge for your home, you should do a little research and find out what comparable properties are renting for in your submarket. This will give you a realistic idea of what repairs and upgrades you should consider for your property. One of the most common ways to raise asking rents is to install a dishwasher and a washer and dryer. If you already have these appliances but they’re not recent, it may be worth it to upgrade to energy-efficient appliances. This will help lower your tenants’ energy costs while allowing you to increase your asking rent. On the other hand, if you’re only planning on renting your home as an Airbnb, the appliances will be less important. Instead, you might consider refreshing your décor and decluttering your space. Whether your home will be a short-term rental or you plan on renting it out to tenants year-round, make sure that it photographs well and has curb appeal.
Once someone has expressed an interest in renting your property, you should be ready to screen them. That includes a background check and a credit report. Ask for references and make sure to contact their most recent landlord. The other important piece of this is that you need to have a lease that you and an attorney have created. While you may be tempted to save money and use a generic lease from the internet, that’s not advisable. One of the main reasons to avoid this is that different states can have drastically different laws regarding landlords and tenants. You want to make sure that you have a document that will protect you as much as possible in the event that you and your tenant have a conflict. Making sure that a lease is written for your city and state isn’t enough, as it could be an older lease that hasn’t been updated. It’s fine to use a lease from the internet as a template that you and your attorney can revise for your needs. Also, many attorneys who specialize in commercial real estate will probably already have a lease that they can tailor for your needs.
While switching your residence from your forever home to a rental property can feel complicated, you’re also in a great position to understand the pros and cons of your home. This will make it a lot easier for identifying necessary upgrades and being able to market it to potential tenants.
